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What changed in ASTEC INDUSTRIES INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ASTEC INDUSTRIES INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+340 added−365 removedSource: 10-K (2024-02-28) vs 10-K (2023-03-01)

Top changes in ASTEC INDUSTRIES INC's 2023 10-K

340 paragraphs added · 365 removed · 224 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

64 edited+44 added−56 removed17 unchanged
Biggest changeGrow We are focused on growing sales and profits organically as well as selectively pursuing strategic acquisitions and partnerships within the "Rock to Road" value chain, including by: • Focusing on innovation with a new product development approach that increases our market competitiveness over time. • Leveraging technology and digital connectivity to enhance the customer experience through controls and automation and other technologies. • Identifying potential targets for strategic acquisitions and partnerships globally to establish a presence in attractive new markets, supplement our current product offerings or accelerate technologies or other enhancements that leverage our existing product portfolio. • Strengthening our capabilities to deliver an enhanced aftermarket experience that best meets our customers' needs while creating scalable growth.
Biggest changeSpecific actions we are taking to strengthen and maintain our focus on our customers include: • Strengthening our capabilities to deliver an enhanced aftermarket experience that best meets our customers' needs while creating scalable growth. • Driving commercial and operational excellence and providing innovative solutions to strengthen our relationships with customers and dealers while maintaining our market leadership positions. • Simplifying our product offerings and production processes through the development of a rationalized global product portfolio executed through manufacturing centers of excellence. • Identifying opportunities to strengthen our global presence in attractive new markets, supplement our current product offerings or accelerate technologies or other enhancements that leverage our existing product portfolio to better meet our customers' needs either through strategic acquisition, partnerships or organic growth. • Enhancing quality, parts availability and customer connectivity through Astec Digital.
Our products are marketed both domestically and internationally primarily to asphalt producers; highway and heavy equipment contractors; utility contractors; sand and gravel producers; construction, demolition, recycle and crushing contractors; forestry and environmental recycling contractors; mine and quarry operators; port and inland terminal authorities; power stations and domestic and foreign government agencies.
Our products are marketed both domestically and internationally primarily to asphalt and concrete producers; highway and heavy equipment contractors; utility contractors; sand and gravel producers; construction, demolition, recycle and crushing contractors; forestry and environmental recycling contractors; mine and quarry operators; port and inland terminal authorities; power stations and domestic and foreign government agencies.
We make available, free of charge on or through our website (www.astecindustries.com), access to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements on Schedule 14A, Section 16 reports, amendments to those reports and other documents filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material is filed with, or furnished to, the Securities and Exchange Commission ("SEC").
We make available, free of charge on or through our website (www.astecindustries.com), access to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements on Schedule 14A, Section 16 reports, amendments to those reports and other 10 Table of Contents documents filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material is filed with, or furnished to, the Securities and Exchange Commission ("SEC").
Approximately 83 of our active U.S. employees are covered by a collective bargaining agreement with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO-CLC on behalf of its local affiliate Local Union No. 11-508-03, with an expiration date of December 11, 2025.
Approximately 78 of our active U.S. employees are covered by a collective bargaining agreement with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO-CLC on behalf of its local affiliate Local Union No. 11-508-03, with an expiration date of December 11, 2025.
However, air pollution control equipment we manufacture, principally for hot-mix asphalt plants, must comply with certain performance standards promulgated by the Environmental Protection Agency under the Clean Air Act applicable to "new sources" or new plants. We believe our products meet all material requirements of such regulations, applicable state pollution standards and environmental protection laws.
However, the air pollution control equipment we manufacture, principally for hot-mix asphalt plants, must comply with certain performance standards promulgated by the EPA under the Clean Air Act applicable to "new sources" or new plants. We believe our products meet all material requirements of such regulations, applicable state pollution standards and environmental protection laws.
As such, our focus is monitoring, assessing and abating leading safety indicators through our Unsafe Work Observation program, thus preventing accidents before they happen or reducing the impact if they do occur. Abatement of safety issues in a timely fashion is incentivized through our annual incentive program, which is partially focused on this leading safety metric.
As such, our focus is monitoring, assessing and abating leading safety indicators through our Unsafe Work Observation program, thus preventing accidents before they happen or reducing the impact if they do occur. Abatement of safety issues in a timely manner is incentivized through our annual incentive program, which is partially focused on this leading safety metric.
Materials Solutions equipment primary competitors include the following as well as smaller manufacturers, both domestic and international: CDE Group McCloskey International (part of Metso Outotec Corporation) Terex Corporation Deister Machine Company, Inc McLanahan Corporation Thor Manufacturing Ltd. Epiroc Metso Outotec Corporation Weir Group EDGE Innovate Sandvik Group Wirtgen Group (a John Deere Company) Masaba, Inc. Superior Industries, Inc.
The Materials Solutions segment's primary competitors include the following as well as smaller manufacturers, both domestic and international: CDE Group McCloskey International (part of Metso Outotec Corporation) Terex Corporation Deister Machine Company, Inc McLanahan Corporation Thor Manufacturing Ltd. Epiroc Metso Outotec Corporation Weir Group EDGE Innovate Sandvik Group Wirtgen Group (a John Deere Company) Masaba, Inc. Superior Industries, Inc.
In addition, in the first quarter of 2022, a lean manufacturing initiative at one of our largest sites was initiated and is expected to drive improvement in gross margin at that site. We substantially completed the design efforts for this project during 2022.
Additionally, in the first quarter of 2022, a lean manufacturing initiative at one of our largest sites was initiated and is expected to drive improvement in gross margin at that site. We substantially completed the design efforts for this project during 2022.
ITEM 1. BUSINESS Our Company We design, engineer, manufacture and market equipment and components used primarily in road building and related construction activities, as well as other products discussed below. Our products are used in each phase of road building, from quarrying and crushing the aggregate to application of the road surface for both asphalt and concrete.
ITEM 1. BUSINESS Our Company We design, engineer, manufacture, market and service equipment and components used primarily in asphalt and concrete road building and related construction activities, as well as other products discussed below. Our products are used in each phase of road building, from quarrying and crushing the aggregate to application of the road surface.
Marketing We market our products domestically and internationally through direct and dealer support sales staff, domestic and international independent distributors and our international distribution sites in both of our reportable segments. Asphalt and concrete plants and their related equipment are sold directly to asphalt or concrete producers, respectively, or domestic and foreign government agencies.
Marketing We market our products domestically and internationally through direct and dealer support sales staff, domestic and international independent distributors and our international distribution sites in each of our reportable segments. Asphalt and concrete plants and their related equipment are sold to asphalt or concrete producers, respectively, or domestic and foreign government agencies.
The Infrastructure Solutions segment was operated from the following sites in 2022 : Site Location Site Location Australia Brisbane, Australia EUG-Airport Rd Oregon, United States Blair Nebraska, United States India Ahmedabad, India Burlington Wisconsin, United States LatAm Santiago, Chile CHA-Jerome Ave Tennessee, United States Parsons Kansas, United States CHA-Manufacturers Rd Tennessee, United States St-Bruno Quebec, Canada CHA-Wilson Rd Tennessee, United States 3 Table of Conten t s The sites based in North America within the Infrastructure Solutions segment are primarily manufacturing operations while those located outside of North America generally market, service and install equipment and provide parts in the regions in which they operate for many of the products produced by all of our manufacturing sites.
The Infrastructure Solutions segment was operated from the following sites in 2023 : Site Location Site Location Australia Brisbane, Australia EUG-Airport Rd Oregon, United States Blair Nebraska, United States India Ahmedabad, India Burlington Wisconsin, United States LatAm Santiago, Chile CHA-Jerome Ave Tennessee, United States Parsons Kansas, United States CHA-Manufacturers Rd Tennessee, United States St-Bruno Quebec, Canada CHA-Wilson Rd Tennessee, United States 3 Table of Contents The sites based in North America within the Infrastructure Solutions segment are primarily manufacturing operations while those located outside of North America generally market, service and install equipment and provide parts in the regions in which they operate for many of the products produced by all of our manufacturing sites.
Materials Solutions Segment Overview The Materials Solutions segment designs and manufactures heavy processing equipment, in addition to servicing and supplying parts for the aggregate, metallic mining, recycling, ports and bulk handling markets.
Materials Solutions Segment Overview The Materials Solutions segment designs and manufactures heavy rock processing equipment, in addition to servicing and supplying parts for the aggregate, mining, recycling, ports and bulk handling markets.
The Materials Solutions segment was operated from the following sites in 2022 : Site Location Site Location AME Johannesburg, South Africa Sterling Illinois, United States Belo Horizonte Belo Horizonte, Brazil Thailand Bangkok, Thailand EUG-Franklin Blvd Oregon, United States Thornbury Ontario, Canada Johannesburg Johannesburg, South Africa Yankton South Dakota, United States Omagh Omagh, United Kingdom 6 Table of Conten t s The sites within the Materials Solutions segment primarily focus on manufacturing operations with the AME site functioning to market, service and install equipment and provide parts in the regions in which they operate for many of the products produced by all of our manufacturing sites.
The Materials Solutions segment was operated from the following sites in 2023 : Site Location Site Location AME Johannesburg, South Africa Sterling Illinois, United States Belo Horizonte Belo Horizonte, Brazil Thailand Bangkok, Thailand EUG-Franklin Blvd Oregon, United States Thornbury Ontario, Canada Johannesburg Johannesburg, South Africa Yankton South Dakota, United States Omagh Omagh, United Kingdom The sites within the Materials Solutions segment primarily focus on manufacturing operations with the AME and Thailand sites functioning to market, service and install equipment and provide parts in the regions in which they operate for many of the products produced by all of our manufacturing sites.
We also have 129 trademarks registered in foreign jurisdictions, including Argentina, Australia, Brazil, Canada, China, the European Union, France, Germany, India, Italy, Kazakhstan, Mexico, New Zealand, Paraguay, Peru, Russia, South Africa, South Korea, Taiwan, Thailand, the United Kingdom, Ukraine, Uruguay and Vietnam. We have 13 United States and 17 foreign trademark registration applications pending.
We also have 129 trademarks registered in foreign jurisdictions, including Argentina, Australia, Brazil, Canada, Chile, China, the European Union, France, Germany, India, Italy, Kazakhstan, Mexico, New Zealand, Paraguay, Peru, Russia, South Africa, South Korea, Taiwan, Thailand, the United Kingdom, Ukraine, Uruguay and Vietnam. We have 5 United States and 12 foreign trademark registration applications pending.
In addition, we are focused on innovation in our products to support the "Rock to Road" value chain. Seasonality and Backlog Revenues have historically been strongest during the first, second and fourth quarters with the third quarter typically generating weaker results.
In addition, we are focused on innovation in our core products to support the "Rock to Road" value chain. 8 Table of Contents Seasonality and Backlog Revenues have historically been strongest during the first, second and fourth quarters with the third quarter typically generating weaker results.
Paving and related equipment Bomag (part of Fayat Group), Caterpillar Paving Products (part of Caterpillar, Inc.), Dynapac (part of Fayat Group), LeeBoy, Wirtgen Group (a John Deere Company), Volvo Construction Equipment (part of Volvo Group) and Weiler Inc.
Paving and related equipment • Bomag (part of Fayat Group) • Caterpillar Paving Products (part of Caterpillar, Inc.) • Dynapac (part of Fayat Group) • LeeBoy • Vogele (part of Wirtgen Group, a John Deere Company) • Weiler Inc.
Unions also represent approximately 18% of our employees at our manufacturing facilities outside the U.S. We consider our employee relations to be good. Compensation and Benefits As we strive to be an employer of choice, we provide competitive and robust compensation and benefits. We achieve this by regularly conducting market reviews and adjusting as needed.
Unions also represent approximately seven percent of our employees at our manufacturing facilities outside the U.S. We consider our employee relations to be good. 9 Table of Contents Compensation and Benefits As an employer of choice, we provide competitive and robust compensation and benefits. We achieve this by regularly conducting market reviews and adjusting as needed.
Materials Solutions equipment and aftermarket sales and service programs are primarily marketed through an extensive network of dealers via dealer support sales employees and domestic and international independent distributors. Competition The Materials Solutions segment faces strong competition in price, service and product performance.
Materials Solutions equipment and aftermarket sales and service programs are primarily marketed through an extensive network of dealers via dealer support sales employees, domestic and international independent distributors and our international distribution sites in each of our reportable segments. Competition The Materials Solutions segment faces strong competition in price, service and product performance.
Our sites have programs designed to upskill manufacturing employees in the areas specifically required for local production needs. In addition, we partner with national vendors specialized in skilled labor recruitment and many of our sites have relationships with local trade schools and community colleges to attract talent. In 2022, we again engaged our employees through the Voice of OneASTEC survey.
Our sites have programs designed to upskill manufacturing employees in the areas specifically required for local production needs. In addition, we partner with national vendors specialized in skilled labor recruitment and many of our sites have relationships with local trade schools and community colleges to attract talent.
Infrastructure Solutions Segment Overview The Infrastructure Solutions segment designs, engineers, manufactures and markets a complete line of asphalt plants, concrete plants and their related components and ancillary equipment as well as supplying asphalt road construction equipment, industrial thermal systems and other heavy equipment.
Infrastructure Solutions Segment Overview The Infrastructure Solutions segment designs, engineers, manufactures and markets a complete line of asphalt and concrete plants, components and ancillary equipment as well as asphalt road construction equipment, industrial thermal systems, land clearing, recycling and other heavy equipment.
As of December 31, 2022, the functional representation of our employees was as follows: 2,828 were engaged in manufacturing, 399 in engineering, including support staff, and 1,064 in selling, administrative and management functions. Unions are certified as bargaining agents for approximately two percent of our U.S. direct employees.
As of December 31, 2023, the functional representation of our employees was as follows: 2,869 were engaged in manufacturing, 366 in engineering, including support staff, and 1,087 in selling, administrative and management functions. Unions are certified as bargaining agents for approximately two percent of our U.S. direct employees.
We also manufacture certain equipment and components unrelated to road construction, including equipment for the mining, quarrying, construction, demolition, land clearing and recycling industries and port and rail yard operators; industrial heat transfer equipment; commercial whole-tree pulpwood chippers; horizontal grinders; blower trucks; commercial and industrial burners; and combustion control systems.
We also offer industrial automation controls and telematics platforms as well as manufacturing certain equipment and components unrelated to road construction, including equipment for the mining, quarrying, construction, demolition, land clearing and recycling industries and port and rail yard operators; industrial heat transfer equipment; commercial whole-tree pulpwood chippers; horizontal grinders; blower trucks; commercial and industrial burners; and combustion control systems.
Corporate and Other The Corporate and Other category consists primarily of the parent company, the Company's captive insurance company, Astec Insurance, and the controls and automation business, which do not meet the requirements for separate disclosure as an operating segment or inclusion in one of the other reporting segments.
Corporate and Other The Corporate and Other category consists primarily of the parent company, the Company's captive insurance company, Astec Insurance, and the controls and automation business including the MINDS Automation Group, Inc. business acquired in April 2022, collectively, Astec Digital, which do not meet the requirements for separate disclosure as an operating segment or inclusion in one of the other reporting segments.
The Corporate and Other category consists primarily of the parent company, Astec Insurance Company ("Astec Insurance" or the "captive"), a captive insurance company, and the controls and automation business, which do not meet the requirements for separate disclosure as an operating segment or inclusion in one of the other reporting segments.
The Corporate and Other category consists primarily of our parent company, Astec Insurance Company ("Astec Insurance" or the "captive"), our captive insurance company, and Astec Digital, our controls and automation business including the MINDS Automation Group, Inc. business acquired in April 2022, which do not meet the requirements for separate disclosure as an operating segment or inclusion in one of the other reporting segments.
We have 81 trademarks registered in the United States, including logos for Astec, Carlson Paving, Heatec, KPI-JCI, Peterson Pacific, Power Flame, Roadtec and Telsmith, and the names ASTEC, CARLSON, HEATEC, JCI, KOLBERG, PETERSON, POWER FLAME, ROADTEC and TELSMITH, as well as a number of other product names.
Our subsidiaries have 10 United States and 28 foreign patent applications pending. We have 83 trademarks registered in the United States, including logos for Astec, Carlson Paving, Heatec, KPI-JCI, Peterson Pacific, Power Flame, Roadtec and Telsmith, and the names ASTEC, CARLSON, HEATEC, JCI, KOLBERG, PETERSON, POWER FLAME, ROADTEC and TELSMITH, as well as a number of other product names.
We have created our rock breaking equipment line for aggregate, mining, construction and demolition applications. Our comprehensive range of rock breaker boom systems are designed to break oversized material at large gyratories, grizzlies and primary/secondary crushing application sites. These systems include boom-mounted configurations, automatic greasing packages, motor starter panels, joystick controls and easy plant integration.
Our comprehensive range of rock breaker boom systems are designed to break oversized material at large gyratories, grizzlies and primary/secondary crushing application sites. These systems include boom-mounted configurations, automatic greasing packages, motor starter panels, joystick controls and easy plant integration.
Information contained in our website is not part of, and is not incorporated into, this Annual Report on Form 10-K or any other report we file with or furnish to the SEC. The SEC also maintains electronic versions of our reports on its website at www.sec.gov.
Information contained in our website is not part of, and is not incorporated into, this Annual Report on Form 10-K or any other report we file with or furnish to the SEC.
We also began executing investments to acquire and install manufacturing equipment intended to drive increased efficiencies in our production processes. We plan to continue these capital investments during 2023, which are anticipated to be completed by the end of the year. Gross margin improvements are expected to be realized with the project completion in early to mid-2024.
We also began executing investments to acquire and install manufacturing equipment intended to drive increased efficiencies in our production processes. We continued these capital investments during 2023, which were largely completed as of December 31, 2023. Gross margin improvements are expected to be realized in conjunction with the project completion in early to mid-2024.
The Infrastructure Solutions segment competitors include: Product Categories Primary Competitors Asphalt plants and related components Asphalt Drum Mixers Inc, Asphalt Equipment Company Inc. dba ALmix, Ammann Group, Wirtgen Group (a John Deere Company), Marini (part of Fayat Group), Gencor Industries, Inc. and local manufacturers Concrete equipment ERIE Strayer Company, Stephens Manufacturing and Vince Hagan Co.
The Infrastructure Solutions segment's primary competitors include the following as well as smaller manufacturers, both domestic and international: Product Categories Primary Competitors Asphalt plants and related components • Asphalt Drum Mixers Inc • Asphalt Equipment Company Inc. dba ALmix • Ammann Group • Gencor Industries, Inc • Benninghoven (part of Wirtgen Group, a John Deere Company) Concrete equipment • ERIE Strayer Company • Stephens Manufacturing • Vince Hagan Co.
Backlog At December 31, 2022 and 2021, the backlog for the Materials Solutions segment was approximately $341.2 million and $313.3 million, respectively.
Backlog At December 31, 2023 and 2022, the backlog for the Materials Solutions segment was approximately $162.7 million and $341.2 million, respectively.
We have materially completed the ERP global design in 2022, launched the human capital resources module throughout our domestic sites in January 2023 and expect to convert the operations of one manufacturing site along with Corporate in 2023 to set the foundation before accelerating the implementation at additional manufacturing sites.
We materially completed the ERP global design in 2022, launched the human capital resources module in our locations in the United States in January 2023 and converted the operations of one manufacturing site along with Corporate during the second quarter of 2023 to set the foundation before accelerating the implementation at additional sites in 2024 and 2025.
Asphalt paving and road building equipment are sold to highway and heavy equipment contractors, utility contractors and domestic and foreign governmental agencies. Wood chippers, horizontal grinders and blower trucks are primarily sold to forestry and environmental recycling contractors.
Asphalt paving and road building equipment are sold to highway and heavy equipment contractors, utility contractors, commercial and residential paving contractors and governmental agencies, both domestically and internationally. Wood chippers, horizontal grinders and blower trucks are primarily sold to clearing, right of way, forestry and environmental recycling contractors.
A portion of the interstate highway system is surfaced in concrete, but the significant majority of surfaced roads in the U.S. are 9 Table of Conten t s paved with asphalt. Although concrete is used for some new road surfaces, asphalt is used for most resurfacing.
In addition, asphalt and concrete are generally considered competitive products as a surface choice for new roads and highways. A portion of the interstate highway system is surfaced in concrete, but the significant majority of surfaced roads in the U.S. are paved with asphalt. Although concrete is used for some new road surfaces, asphalt is used for most resurfacing.
Milling equipment Bomag (part of Fayat Group), Caterpillar Paving Products (part of Caterpillar, Inc.), CMI Roadbuilding, Dynapac (part of Fayat Group), Volvo Construction Equipment (part of Volvo Group AB) and Wirtgen Group (a John Deere Company) Forestry and recycling equipment Bandit Industries, Inc., Doppstadt, Morbark, Rotochopper Inc. and Vermeer Corporation Backlog The backlog for the Infrastructure Solutions segment at December 31, 2022 and 2021 was approximately $567.1 million and $449.3 million, respectively.
Milling equipment • Bomag (part of Fayat Group) • Caterpillar Paving Products (part of Caterpillar, Inc.) • CMI Roadbuilding • Dynapac (part of Fayat Group) • Wirtgen Group (a John Deere Company) Forestry and recycling equipment • Bandit Industries, Inc. • Diamond Z • Doppstadt • EDGE Innovate • Tigercat • Morbark (part of Alamo Group) 5 Table of Contents Backlog The backlog for the Infrastructure Solutions segment at December 31, 2023 and 2022 was approximately $404.6 million and $567.1 million, respectively.
Products and Services The primary products produced by the Infrastructure Solutions segment include: Asphalt plants and related components Heaters Concrete dust control systems Asphalt pavers Vaporizers Concrete material handling systems Screeds Heat recovery units Paste back-fill plants Asphalt storage tanks Hot oil heaters Bagging plants Fuel storage tanks Industrial and asphalt burners and systems Blower trucks and trailers Material transfer vehicles Soil stabilizing/reclaiming machinery Wood chippers and grinders Milling machines Soil remediation plants Control systems Pump trailers Concrete batch plants Service, construction and retrofits Liquid terminals Storage equipment and related parts Engineering and environmental permitting services Polymer plants Concrete mixers A typical asphalt mixing plant consists of heating and storage equipment for liquid asphalt; cold feed bins for blending aggregates; a counter-flow continuous type unit (Astec Double Barrel) for drying, heating and mixing; a baghouse composed of air filters and other pollution control devices; hot storage bins or silos for temporary storage of hot-mix asphalt; and a control house.
Products and Services The primary products produced and services provided by the Infrastructure Solutions segment include: Asphalt plants and related components Heaters Concrete dust control systems Asphalt pavers Vaporizers Concrete material handling systems Screeds Heat recovery units Paste back-fill plants Asphalt storage tanks Hot oil heaters Bagging plants Fuel storage tanks Industrial and asphalt burners and systems Blower trucks and trailers Material transfer vehicles Soil stabilizing/reclaiming machinery Wood chippers and grinders Milling machines Soil remediation plants Control systems Pump trailers Concrete batch plants Service, construction and retrofits Liquid terminals Storage equipment and related parts Engineering and environmental permitting services Polymer plants Concrete mixers As the backbone of road infrastructure development, asphalt and concrete mixing plants play a crucial role in the construction industry.
Human Capital Resources and Management Our employees around the world are each guided by our purpose: Built to Connect, and our vision: To connect people, processes and products, advancing innovative solutions from "Rock to Road" as OneASTEC. Every employee is also guided by our values and our code of business conduct.
Human Capital Resources and Management Our employees around the world are each guided by our Purpose: Built to Connect, and our Vision: To build industry changing solutions that create life-changing opportunities. Every employee is also guided by our values and our code of business conduct.
We aspire to reduce recordable injuries and lost time each year. During the year ended December 31, 2022, we had zero recordable injuries at four of our manufacturing sites.
We strive for continual, incremental improvements in our safety program to reduce recordable injuries and lost time each year. During the year ended December 31, 2023, we had zero recordable injuries at five of our manufacturing sites.
The upgraded ERP will initially convert our internal operations, manufacturing, finance, human capital resources management and customer relationship systems to cloud-based platforms. This new ERP system will provide for standardized processes and integrated technology solutions that enable us to better leverage automation and process efficiency, transforming how we connect people, products and processes to operate as OneASTEC.
This new ERP system will also provide for standardized processes and integrated technology solutions that enable us to better leverage automation and process efficiency, transforming how we connect people, products and processes to operate as OneASTEC.
In addition to manufacturing core Materials Solutions products and asphalt plants, Belo Horizonte markets all our products to the Brazilian market. We plan to continue to expand manufacturing at Belo Horizonte to include other product lines. At December 31, 2022, we had an ownership interest of approximately 93% in Belo Horizonte.
In addition to manufacturing core Materials Solutions products and asphalt plants, Belo Horizonte markets all our products to the Brazilian market. At December 31, 2023, we had an ownership interest of approximately 93% in Belo Horizonte. During the first quarter of 2022, we executed an agreement with the noncontrolling interest holder to acquire their outstanding interest in full.
We strive to create an environment that attracts top talent and where high performance is fostered and thrives, continuous learning is engrained, diverse experience is leveraged as a competitive advantage and careers are propelled forward. In 2022, our High Performance Framework process ensured company-wide alignment to achieve company goals and targets.
Talent Development, Diversity, Equity and Inclusion Talent and Diversity are key components of our OneASTEC business model. We strive to create an environment that attracts top talent and where high performance is fostered and thrives, continuous learning is engrained, diverse experience is leveraged as a competitive advantage and careers are propelled forward.
Our high frequency screens utilize a high-speed vibration directly induced into the screen media to improve screening efficiency and production rates. The screens' unique rotary tensioning system allows for quick media changes. Our screens are available in multiple sizes with up to four decks and in a variety of configurations including stationary, portable and mobile.
We offer a wide variety of vibrating screens including incline, horizontal, high frequency, multi-frequency, combo and dewatering screens. Our high frequency screens utilize a high-speed vibration directly induced into the screen media to improve screening efficiency and production rates. The screens' unique rotary tensioning system allows for quick media changes.
This improvement is intended to serve as the optimal blueprint for our other manufacturing facilities.
This improvement is intended to serve as the optimal blueprint for our other manufacturing facilities. Business Segments We operate manufacturing sites and sites that operate as sales and service offices for our manufacturing locations.
Competition Each business segment operates in domestic markets that are highly competitive with respect to price, service and product quality. While specific competitors are named within each business segment discussion above, imports do not generally constitute significant competition for us in the United States, except for milling machines and track-mounted crushers.
While specific competitors are named within each business segment discussion above, imports do not generally constitute significant competition for us in the United States, except for milling machines and track-mounted crushers. In international sales, however, we often compete with foreign manufacturers that may have a local presence in the market we are attempting to penetrate.
In addition, due to the size and weight of certain equipment we manufacture, we and our customers may encounter various state regulations on maximum weights transportable on highways.
Due to the size and weight of certain equipment we manufacture, we and our customers may encounter various state regulations on maximum weights transportable on highways. Some states have regulations governing the operation of asphalt mixing plants, and most states have regulations relating to the accuracy of weights and measures, which affect some of the control systems we manufacture.
This new model includes values, professional development and cascaded common performance goals. We provide all employees a wide range of professional development experiences, both formal and informal, at various stages in their careers. In addition, talent development and succession planning for critical roles is a cornerstone of our talent program.
We utilized our High Performance Framework process for the second year during 2023 to ensure company-wide alignment to achieve company goals and targets. This model includes values, professional development and cascaded common performance goals. We provide all employees a wide range of professional development experiences, both formal and informal, at various stages in their careers.
Since the inception of these initiatives, we have consolidated five sites, including our Tacoma site in the first quarter of 2022. Additionally, we are in the process of a multi-year phased implementation of a standardized enterprise resource planning ("ERP") system across our global organization, which will replace much of our existing disparate core financial systems.
Strategic Transformation Program We are undergoing a multi-year phased implementation of a standardized enterprise resource planning ("ERP") system across our global organization, which will replace much of our existing disparate core financial systems.
Our expertly engineered components and plants help producers meet the most stringent material specifications and get the most out of their material, while significantly decreasing water usage. With complete lines of washing, classifying, fines recovery and water clarification plants and systems, we offer solutions for any operation in portable and stationary configurations.
Our expertly engineered components and plants help producers meet the most stringent material specifications and get the most out of their material, while significantly decreasing water usage.
Competition This industry segment faces strong competition in price, service and product performance and competes with both large publicly-traded companies and various smaller manufacturers.
Competition This industry segment faces strong competition in price, service and product performance.
In many cases, we design, engineer and manufacture custom component parts and equipment to meet the particular needs of individual customers. Our manufacturing operations consist primarily of fabricating steel components and the assembly and testing of our products to ensure that we achieve quality standards.
Manufacturing We manufacture our equipment and related component parts for our products at both our domestic and international facilities. In many cases, we design, engineer and manufacture equipment and component parts to meet the particular needs of individual customers.
Our innovative line of material handling solutions includes radial and telescoping conveyors, truck unloaders, hopper feeders, mobile conveyors, pugmills, ship loaders and unloaders, bulk receptions feeders and stationary conveying systems. Our mobile bulk material handling solutions are designed to handle all free-flowing bulk materials, including but not limited to ores, coal, aggregates, fertilizers, grains, woodchips and pellets.
Our mobile bulk material handling solutions are designed to handle all free-flowing bulk materials, including but not limited to ores, coal, aggregates, fertilizers, grains, woodchips and pellets. Our conveying equipment is designed to move or store aggregate and other bulk materials in radial cone-shaped or windrow stockpiles.
Also, some states have regulations governing the operation of asphalt mixing plants, and most states have regulations relating to the accuracy of weights and measures, which affect some of the control systems we manufacture. Compliance with these government regulations has not had a material effect on our capital expenditures, earnings or competitive position within the market to date.
Compliance with these government regulations has not had a material effect on our capital expenditures, earnings or competitive position within the market to date. Patents and Trademarks We seek to obtain patents to protect the novel features of our products and processes. Our subsidiaries hold 116 United States patents and 128 foreign patents.
During the first quarter of 2022, we executed an agreement with the noncontrolling interest holder to acquire their outstanding interest in full. Completion of the transaction is subject to obtaining certain judicial approval in Brazil.
Completion of the transaction is subject to obtaining certain judicial approval in Brazil.
As of December 31, 2022 and 2021, we had a backlog for delivery of products at certain dates in the future of approximately $912.7 million and $762.6 million, respectively. Approximately $146.3 million of the increase in backlog between periods relates to orders from domestic customers. Our contracts reflected in the backlog generally are not, by their terms, subject to termination.
Certain orders for which we have received binding letters of intent or contracts will not be included in backlog until all required contractual documents and deposits are received. As of December 31, 2023 and 2022, we had a backlog for delivery of products at certain dates in the future of approximately $569.8 million and $912.7 million, respectively.
We design and manufacture a broad range of material and bulk handling products for all production goals. Our material handling products cover many applications and are designed for efficiency and high-capacity material transferring, moving and mixing.
Our material handling products cover many applications and are designed for efficiency and high-capacity material transferring, moving and mixing. Our innovative line of material handling solutions includes radial and telescoping conveyors, truck unloaders, hopper feeders, mobile conveyors, pugmills, ship loaders and unloaders, bulk receptions feeders and stationary conveying systems.
We saw improvement in those focus areas with scores increasing by four to six percentage points compared to our prior year results. Employee Profile As of December 31, 2022, we employed 4,291 individuals, including 3,629 employees in the U.S. and Canada. We also retain consultants, independent contractors and temporary and part-time workers.
We also focused on re-establishing engagement at the site level after a lengthy period of pandemic-related social distancing requirements. Employee Profile As of December 31, 2023, we employed 4,322 individuals, including 3,650 employees in the U.S. and Canada. We also retain consultants, independent contractors and temporary and part-time workers.
Raw Materials We purchase raw materials and some manufactured components and replacement parts for our products from leading suppliers both domestically and internationally. Raw materials used in the manufacture of our products include carbon steel, pipe and various types of alloy steel, which are normally purchased from distributors and other sources.
Raw materials used in the manufacture of our products include carbon steel in flat rolled, long products and pipe as well as various types of alloy steel. Our steel suppliers include mills, distributors and other sources. To effectively manage inventory at our manufacturing facilities, we purchase a substantial portion of carbon steel products on a just in time basis.
Raw materials for manufacturing are normally readily available; however, certain highly customized components may require longer than normal lead times. In addition, we have been and continue to experience increased lead times for certain standard production materials and parts and supplies.
When market dynamics warrant, we strategically and selectively order inventory items beyond a just in time basis. Although raw materials for manufacturing are normally readily available, certain highly customized components may require longer than normal lead times such as engines, gearboxes, hydraulic and electronic systems.
We developed the patented water injection warm mix asphalt system, which allows the asphalt mix to be prepared and placed at lower temperatures than conventional systems and operates with a substantial reduction in emissions during paving and load-out.
Customized concrete plants are engineered to fit within job site constraints across a wide range of concrete production applications. Our patented water injection warm mix asphalt system stands out as a revolutionary advancement. This system allows the preparation and placement of asphalt mix at lower temperatures, resulting in substantial emissions reduction during paving and load-out.
The Environmental Protection Agency, the Occupational Safety & Health Administration, other federal agencies and certain state agencies have the authority to promulgate regulations that have an effect on our operations. Many of these federal and state agencies may seek fines and penalties for violations of these laws and regulations.
Government Regulations We are subject to various laws and regulations concerning environmental affairs and employee safety and health in each country that we operate. The EPA, the Occupational Safety & Health Administration ("OSHA") and other local, state and federal agencies have the authority to promulgate regulations that can impact our operations.
In total, 81% of our workforce responded and provided us with valuable feedback, a significant increase from the 73% participation in 2021. Throughout the year we have focused on the three main areas of opportunity identified: communication, performance management and diversity.
We engaged our employees through the Voice of OneASTEC survey in 2022, with 81% of our workforce responding and providing us with valuable feedback. With the strong survey results provided in 2022, we continued our focus during 2023 on the areas of opportunity identified: communication, performance management and change management.
Our industry-leading hydraulic-relief jaw crushers offer enhanced safety and easy maintenance. Our crushers are available as individual components, portable wheeled plants and mobile track plants. We offer a wide variety of vibrating screens including incline, horizontal, high frequency, multi-frequency, combo and dewatering screens.
Our newly redesigned FT-Series Mobile Cone Crushers are equipped with updated controls systems, more reliable engines and increased capacity for use in secondary and tertiary crushing applications. Our industry-leading hydraulic-relief jaw crushers offer enhanced safety and easy maintenance. Our crushers are available as individual components, portable wheeled plants and mobile track plants.
High plant portability is an industry innovation that we have developed and successfully market. The components in our asphalt mixing plants are fully automated and use both microprocessor-based and programmable logic control systems for efficient operation. The plants are manufactured to meet or exceed federal and state clean air standards.
Our burner portfolio has the ability to achieve the most stringent emissions and efficiency requirements for a variety of projects. Our mixing plants boast fully automated components, incorporating microprocessor-based and programmable logic control systems for optimal efficiency. As part of our commitment to environmental responsibility, these plants are manufactured to meet or exceed federal and state clean air standards.
However, we experienced a 15% increase in our Occupational Safety and Health Administration Recordable Incident Rate for the year ended December 31, 2022, to 1.96 compared to 1.71 for the year ended December 31, 2021. Although we have seen an increase in the recordable incident rate, the incidents are concentrated in a limited number of sites.
In 2023, we experienced a 35% decrease in our OSHA Recordable Incident Rate for the year ended December 31, 2023, to 1.27 compared to 1.96 for the year ended December 31, 2022. We continually assess safety risks in order to address issues before accidents happen.
We have been able to operate under these laws and regulations without any material adverse effect on our business. None of our operations are within highly regulated industries.
Local, state and federal regulating agencies have the potential to impose fines and penalties for violations of laws and regulations. None of our operations are within highly regulated industries.
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Corporate Strategic Objectives Beginning in late 2019, we initiated a strategic transformation focused on implementing new business strategies and a new operating structure. This transformation was focused on aligning our operations under the OneASTEC business model with the strategic pillars of Simplify, Focus and Grow.
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Corporate Strategic Objectives In late 2023, management refreshed our OneASTEC Vision: To build industry changing solutions that create life-changing opportunities . Our strategic pillars are aligned to support our Vision and are focused on our employees, our customers and our innovation.
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Simplify As part of our strategic transformation, we have focused on optimizing our organizational structure and operations to execute our profitable growth strategy by: • Centralizing our organization into sites with common platforms and operating models that support organic sales growth to make it easier for our customers, partners, employees and shareholders to understand and interact with us. • Focusing on productivity gains and cost reductions across our business through reducing complexity in our organization structure to drive greater efficiencies across our operations while maintaining strong customer relationships. • Simplifying our product offerings through the development of a rationalized global product portfolio executed through manufacturing centers of excellence.
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Empowered, Enabled and Engaged Employees We strive to develop empowered, enabled and engaged employees by providing competitive compensation and benefits, offering professional and technical skills development opportunities and maintaining a focus on safety.
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Focus We believe enhanced efficiencies across the Astec organization will result from utilizing our OneASTEC business model to concentrate resources on excellence initiatives, including: • Driving commercial excellence and providing a holistic set of solutions to strengthen our relationships with customers and dealers while maintaining our market leadership positions. • Streamlining operational excellence processes through the implementation of lean principles in our operations and incorporate production systems that embed continuous improvement into the culture of our manufacturing processes. • Aligning key performance metrics and incentives to enhance accountability across the business and drive a performance-based culture. • Targeting recently completed acquisitions to ensure comprehensive integration of operations and realization of anticipated synergies to support sales and profit growth. 2 Table of Conten t s The customer relationship and human capital resources components of our ERP implementation discussed above are anticipated to support the excellence initiatives of our OneASTEC business model.
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In addition, we leverage the following initiatives, among others, to enhance our employee experience: • Reinforcing our OneASTEC business model through development of common platforms to unite and strengthen the integration of our global business. • Establishing a performance culture through consistent execution with a focus on our OneASTEC operating model. • Streamlining operational excellence processes that embed continuous improvement into our manufacturing processes. • Providing life changing learning and development opportunities.
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Since 2020, we have completed four acquisitions, strengthening our concrete production equipment and controls and automation offerings. A further discussion of these acquisitions is included in Part II, Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
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Customer Focused We believe that a strong focus on customers across the Astec organization drives our Vision.
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Business Segments We operate manufacturing sites and sites that operate as sales and service offices for our manufacturing locations.
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Industry Changing Innovation We have a legacy of industry changing innovation that has been instrumental to our success for over 50 years.
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Based on an internal review of our operations, beginning January 1, 2022, the India site, which was previously incorporated into the Materials Solutions segment, is reported in the Infrastructure Solutions segment while the Thailand site, which was previously included in the Infrastructure Solutions segment, is reported in the Materials Solutions segment.
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We are continuing to build on that legacy by: • Focusing on innovation with a new product development approach that increases our market competitiveness over time. • Leveraging technology and digital connectivity to enhance the customer experience through controls and automation and other technologies. 2 Table of Contents • Developing the Astec Digital Ecosystem to enable customers to leverage our entire product portfolio and associated data.
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We introduced the concept of high plant portability for asphalt plants in 1979. Our current generation of portable asphalt plants is marketed as the Six Pack and consists of six or more portable components designed to be easily transported from one construction site to another, thereby reducing relocation expenses and interruption of operations.
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The upgraded ERP will support our focus on our employees, our customers and innovation initially through the conversion of our internal operations, manufacturing, finance, human capital resources management and customer relationship systems to cloud-based platforms.
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We also build batch type asphalt plants and have developed specialized asphalt recycling equipment for use with our hot-mix asphalt plants. We engineer and develop new products and product enhancements dedicated to improving customers' productivity and profitability. Our products share environmentally conscious designs and are crafted from quality materials by an expert staff of dedicated professionals.
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We have been at the forefront of introducing groundbreaking innovations that have reshaped the landscape of asphalt and concrete production since our inception.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny such access, disclosure or other loss of information could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, disrupted operations, production downtimes and damage our reputation, any of which could have an adverse effect on our business.
Biggest changeIn such an event, we could potentially be subject to production downtimes, operational delays, other detrimental impacts on our operations or ability to provide products and services to our customers, the compromising of confidential or otherwise protected information, misappropriation, destruction or corruption of data, security breaches, misappropriation of corporate funds, other manipulation or improper use of our systems or networks, legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, financial losses from remedial actions, loss of business or potential liability and/or damage to our reputation, any of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Certain of our international subsidiaries in South Africa, Australia, Brazil, Canada and the United Kingdom have entered into their own independent loan agreements with the same lenders to our credit agreement as well as with other lending institutions.
Certain of our international subsidiaries in Australia, Brazil, Canada, South Africa and the United Kingdom have entered into their own independent loan agreements with the same lenders to our credit agreement as well as with other lending institutions.
Designing and developing innovative equipment to function as expected is inherently difficult and significant design phase, field testing and redesign costs are often incurred in connection with such design and development activities.
Designing and developing innovative equipment and technologies to function as expected is inherently difficult and significant design phase, field testing and redesign costs are often incurred in connection with such design and development activities.
Our ability to match new product offerings to diverse global customers' anticipated preferences for different types and sizes of equipment and various equipment features and functionality, at affordable prices, is critical to our success. This requires a thorough understanding of our existing and potential customers on a global basis, particularly in Asia, Middle East and Africa, and Latin America.
Our ability to match new product offerings to diverse global customers' anticipated preferences for different types and sizes of equipment and various equipment features and functionality, at affordable prices, is critical to our success. This requires a thorough understanding of our existing and potential customers on a global basis, particularly in Europe, Asia, Africa, the Middle East and Latin America.
Any widespread disruption to our facilities resulting from fire, earthquake, weather-related events (such as tornadoes, hurricanes, flooding and other storms), an act of terrorism or any other cause could damage a significant portion of our inventory and could materially impair our ability to distribute our products to customers.
Any widespread disruption to our facilities resulting from fire, earthquake, weather-related events (such as tornadoes, hurricanes, flooding and other storms), an act of terrorism, geopolitical conflicts or any other cause could damage a significant portion of our inventory and could materially impair our ability to distribute our products to customers.
Failure to successfully complete restructuring activities could negatively affect our operations. From time to time, we may wind down certain business activities, product lines, and/or perform other organizational restructuring projects in an effort to reduce costs and streamline operations.
Failure to successfully complete restructuring activities could negatively affect our operations. From time to time, we may divest of or wind down certain business activities, product lines, and/or perform other organizational restructuring projects in an effort to reduce costs and streamline operations.
Environmental, Social and Governance risks could adversely affect our reputation and shareholder, employee, customer and third party relationships and may negatively affect our stock price. As a public company, we face increased public and investor scrutiny related to Environmental, Social and Governance ("ESG") activities.
Environmental, Social and Governance risks could adversely affect our reputation and shareholder, employee, customer and third party relationships and may negatively affect our stock price. As a public company, we face increased public and investor scrutiny related to Environmental, Social and Governance (“ESG”) activities.
Our failure to fully integrate future acquired businesses effectively or to manage other consequences of our acquisitions, including increased indebtedness, could prevent us from remaining competitive and, ultimately, could adversely affect our financial condition, operating results and cash flows. Financial Risks We may be unsuccessful in complying with the financial ratio covenants or other provisions of our credit agreement.
Our failure to fully integrate future acquired businesses effectively or to manage other consequences of our acquisitions, including increased indebtedness, could prevent us from remaining competitive and, ultimately, could adversely affect our financial condition, operating results and cash flows. 14 Table of Contents Financial Risks We may be unsuccessful in complying with the financial ratio covenants or other provisions of our credit agreement.
As of December 31, 2022, we were in compliance with the financial covenants contained in our credit agreement. However, in the future we may be unable to comply with the financial covenants in our credit facility or to obtain waivers with respect to such financial covenants.
As of December 31, 2023, we were in compliance with the financial covenants contained in our credit agreement. However, in the future we may be unable to comply with the financial covenants in our credit facility or to obtain waivers with respect to such financial covenants.
Such risks include the possibility of unfavorable circumstances arising from host country laws or regulations and general economic and political conditions in the countries we do business, which are typically more volatile than the U.S. economy and more vulnerable to geo-political conditions. In addition, the U.S.
Such risks include the possibility of unfavorable circumstances arising from host country laws or regulations and general economic and political conditions in the countries we do business, which are typically more volatile than the U.S. and more vulnerable to geopolitical conditions. In addition, the U.S.
If we are unable to attract the most talented candidates, and cannot retain and engage additional highly qualified managerial, technical, manufacturing, and sales and marketing personnel by investing in their talent and personal development, our operational and financial performances could continue to suffer.
If we are unable to attract the most talented candidates, and cannot retain and engage 15 Table of Contents additional highly qualified managerial, technical, manufacturing, and sales and marketing personnel by investing in their talent and personal development, our operational and financial performances could continue to suffer.
Other intangible assets are subject to impairment assessments if conditions exist that indicate the carrying value may not be recoverable. At October 1, 2022, we performed a quantitative assessment of impairment, and our testing indicated no impairment had occurred at any of our four reporting units.
Other intangible assets are subject to impairment assessments if conditions exist that indicate the carrying value may not be recoverable. At October 1, 2023, we performed a qualitative assessment of goodwill impairment, and our testing indicated no impairment had occurred at any of our four reporting units.
In addition, if we were to lose the services of any one or more key 16 Table of Conten t s employees, whether due to death, disability or termination of employment, our ability to successfully operate our business segments, financial plans, marketing and other objectives could be significantly impaired.
In addition, if we were to lose the services of any one or more key employees, whether due to death, disability or termination of employment, our ability to successfully operate our business segments, financial plans, marketing and other objectives could be significantly impaired.
We risk damage to our brand and reputation if we fail to act responsibly in a number of areas, such as diversity, equity and inclusion, environmental stewardship, including with respect to climate change, human capital management, support for our local communities, corporate governance and transparency, or fail to consider ESG factors in our business operations.
We risk damage to our brand and reputation if we fail to act responsibly or meet any commitments that we may set in a number of areas, such as diversity, equity and inclusion, environmental stewardship, including with respect to climate change, human capital management, support for our local communities, corporate governance and transparency, or fail to consider ESG factors in our business operations.
Several factors, including the following, could cause a downturn in the commercial and residential construction industries in which we operate: • a decrease in the availability of funds for construction; • declining economy domestically and internationally; • labor disputes in the construction industry causing work stoppages; • rising gas and oil prices; • rising steel prices and steel surcharges; • rising interest rates; • energy or building materials shortages; • natural disasters and inclement weather; and • availability of credit for customers.
Several factors, including the following, could cause a downturn in the commercial and residential construction industries in which we operate: • a decrease in the availability of funds for construction; • declining economy domestically and internationally; • labor disputes in the construction industry causing work stoppages; • rising gas and oil prices; • rising steel prices and steel surcharges; • rising interest rates; • energy or building materials shortages; • natural disasters and inclement weather; • changes in regulations; • availability of credit for customers; • geopolitical conflicts; and • general economic and political uncertainty.
These performance standards may change or become more stringent in the future. In addition, we may become subject to additional legislation, regulations or accords regarding climate change, and compliance with any new rules could be difficult and costly as a result of increased energy, environmental, and other costs and capital expenditures to comply with any such legislation, regulation or accord.
In addition, we may become subject to additional legislation, regulations or accords regarding climate change, and compliance with any new rules could be difficult and costly as a result of increased energy, environmental, and other costs and capital expenditures to comply with any such legislation, regulation or accord.
Security breaches and other disruptions to our information technology infrastructure amid a general worldwide increase in threats and more sophisticated and targeted cybercrime could compromise our and our customers' and suppliers' information, exposing us to liability.
Security breaches and other disruptions to our information technology infrastructure amid a general worldwide increase in threats and more sophisticated and targeted cybercrime could compromise our and our customers' and suppliers' information, which could expose us to liability and damage our reputation.
Our operations are dependent upon our information technology systems, which encompass all of our major business functions. We rely upon our information technology systems to run critical functions, including accounting and financial information systems, process receivables, manage and replenish inventory, fill and ship customer orders on a timely basis and coordinate our sales activities across all products and services.
We rely upon our information technology systems to run critical functions, including accounting and financial information systems, process receivables, manage and replenish inventory, fill and ship customer orders on a timely basis and coordinate our sales activities across all products and services.
Disruptions or delays in supply or significant price increases from these suppliers could adversely affect our operations and profitability. Such disruptions, terminations or cost increases could result in cost inefficiencies, delayed sales or reduced sales.
Disruptions or delays in supply or significant price increases from these suppliers could adversely affect our operations and profitability, including our ability to convert our backlog and net sales. Such disruptions, terminations or cost increases could result in cost inefficiencies, delayed sales or reduced sales.
In addition, certain of our equipment is subject to rules limiting emissions and other climate related rules and regulation. In addition, several of our products contain components that must comply with environmental, health and safety laws or regulations, including performance standards, promulgated by the Environmental Protection Agency and other state regulatory agencies.
In addition, certain of our equipment is subject to rules limiting emissions and other climate related rules and regulation. Several of our products contain components that must comply with environmental, health and safety laws or regulations, including performance standards, promulgated by the EPA and other state regulatory agencies. These performance standards may change or become more stringent in the future.
This could reduce demand for our products and materially decrease our revenues. If our products are deemed to infringe upon the patents or proprietary rights of others, we could be required to modify the design of our products, change the name of our products or obtain a license for the use of some of the technologies used in our products.
Additionally, if our products are deemed to infringe upon the patents or proprietary rights of others, we could be required to modify the design of our products, change the name of our products or obtain a license for the use of some of the technologies used in our products.
These matters could also significantly divert the attention of our management. If we are unable to protect our proprietary technology from infringement or if our technology infringes technology owned by others, then the demand for our products may decrease or we may be forced to modify our products, which could increase our costs.
If we are unable to protect our proprietary technology from infringement or if our technology infringes technology owned by others, then the demand for our products may decrease or we may be forced to modify our products, which could increase our costs.
As of December 31, 2022, we had outstanding borrowings of $78.0 million and an additional $2.8 million in letters of credit outstanding under the credit agreement. We may also borrow additional amounts under the credit agreement in the future.
As of December 31, 2023, we had outstanding borrowings of $72.0 million and an additional $3.3 million in letters of credit outstanding under the credit agreement. We may also borrow additional amounts under the credit agreement in the future.
Additionally, we typically incur substantial research and development costs 15 Table of Conten t s each year and have historically received significant research and development tax credits due to these expenditures. Congress could reduce or eliminate such tax credits in future years, which could have a material adverse effect on our operating results.
Additionally, we typically incur substantial research and development costs each year and have historically received significant research and development tax credits due to these expenditures. Congress could reduce or eliminate such tax credits in future years, which could have a material adverse effect on our operating results. Goodwill and other intangible assets comprise a material portion of our total assets.
We are unable to predict when claims or matters will arise and the extent to which they will affect our business, and the international nature of our business exposes us to legal and regulatory matters that arise in foreign jurisdictions as well.
From time to time, we may be involved in various legal proceedings and subject to government investigations. We are unable to predict when claims or matters will arise and the extent to which they will affect our business, and the international nature of our business exposes us to legal and regulatory matters that arise in foreign jurisdictions as well.
We estimate loss contingencies and establish reserves based on our assessment where 17 Table of Conten t s liability is deemed probable and reasonably estimable given the facts and circumstances known to us at a particular point in time. Subsequent developments may affect our assessment and estimates of the loss contingencies recognized as liabilities.
We estimate loss contingencies and establish reserves based on our assessment where liability is deemed probable and reasonably estimable given the facts and circumstances known to us at a particular point in time. Subsequent developments may affect our assessment and estimates of the loss contingencies recognized as liabilities. These matters could also significantly divert the attention of our management.
We may be adversely affected by any natural or man-made disruptions to our distribution and manufacturing facilities, including, but not limited to, future pandemics, climate change and war. We currently maintain a broad network of distribution and manufacturing facilities throughout the U.S. as well as internationally.
We may be adversely affected by any natural or man-made disruptions to our distribution and manufacturing facilities, as well as disruptions and equipment-related issues. We currently maintain a broad network of distribution and manufacturing facilities throughout the U.S. as well as internationally.
We are subject to significant governmental regulation and if we fail to comply with such regulation or if we become subject to increased regulation, we may incur significant costs related to penalties, remedial measures or increased compliance requirements. We are subject to a wide range of government regulations, including the U.S.
We are subject to significant governmental regulation and if we fail to comply with such regulation or if we become subject to increased regulation, we may incur significant costs related to penalties, remedial measures or increased compliance requirements.
Failure to deliver quality products that meet customer needs at competitive prices ahead of competitors could have a significant adverse effect on our business. Our international sales and associated operating results are subject to currency exchange risk. We are exposed to risk as a result of fluctuations in foreign currency exchange rates from transactions involving foreign operations and currencies.
Failure to deliver quality products that meet customer needs at competitive prices ahead of competitors could have a significant adverse effect on our business. 12 Table of Contents Our international sales and associated operating results are subject to currency exchange risk.
Our results of operations could be adversely affected by, among other things, changes in the effective tax rates in the U.S. and foreign jurisdictions, a change in the mix of earnings between U.S. and non-U.S. jurisdictions or among jurisdictions with differing tax rates, changes in tax laws or treaties and related changes in generally accepted accounting principles.
Our results of operations could be adversely affected by, among other things, changes in the effective tax rates in the U.S. and foreign jurisdictions, a change in the mix of earnings between U.S. and non-U.S. jurisdictions or among jurisdictions with differing tax rates, changes in tax laws or treaties, including the global implementation of a minimum tax under Pillar 2 of the Organization for Economic Co-Operation and Development's Base Erosion and Profit Shifting Pillar 2 rules and related changes in generally accepted accounting principles.
Our ability to attract and retain qualified engineers, skilled manufacturing personnel and other professionals, either through direct hiring or acquisition of other businesses employing such professionals, will also be an important factor in determining our future success.
We believe our employees and experienced leadership group are competitive advantages, as the best people, over time, produce the best results. Our ability to attract and retain qualified engineers, skilled manufacturing personnel and other professionals, either through direct hiring or acquisition of other businesses employing such professionals, will also be an important factor in determining our future success.
The cyclical nature of our industry and the customization of the equipment we sell may cause adverse fluctuations to our revenues and operating results. We sell equipment primarily to contractors whose demand for equipment depends greatly upon the volume of road or utility construction projects underway or to be scheduled by both government and private entities.
We sell equipment primarily to contractors whose demand for equipment depends greatly upon the volume of road or utility construction projects underway or to be scheduled by both government and private entities. The volume and frequency of road and utility construction projects are cyclical; therefore, demand for many of our products is cyclical.
This also requires us to anticipate changing customer demands and if we are unable to accurately anticipate such customer demands we will likely incur losses associated with such product development. In addition, any number of unforeseen circumstances can impact actual project costs.
Our success depends on our ability to invest in new technologies and manufacturing techniques to continue to meet those changing demands. If we are unable to accurately anticipate such customer demands, we will likely incur losses associated with such product development. In addition, any number of unforeseen circumstances can impact actual project costs.
A successful claim brought against us in excess of available insurance coverage or a requirement to participate in a product recall may have a material adverse effect on our business.
A successful claim brought against us in excess of available insurance coverage or a requirement to participate in a product recall may have a material adverse effect on our business. In addition, insurance coverage is increasingly expensive, contains more stringent terms and may be difficult to obtain in the future.
We require access to various parts, components and raw materials at competitive prices in order to manufacture our products. Changes in the availability and price of these parts, components and raw materials (including steel) have changed significantly and rapidly at times.
Changes in the availability and price of these parts, components and raw materials (including steel) have changed significantly and rapidly at times.
This new ERP system will provide for standardized processes and integrated technology solutions that enable us to better leverage automation and process efficiency, transforming how we connect people, products and processes to operate as OneASTEC.
The upgraded ERP will convert our internal operations, manufacturing, finance, human capital resources management and customer relationship systems to cloud-based platforms. This new ERP system will provide for standardized processes and integrated technology solutions that enable us to better leverage automation and process efficiency, transforming how we connect people, products and processes to operate as OneASTEC.
We derive significant revenue, earnings and cash flow from operations outside of the U.S., where business operations are transacted in local currencies.
We are exposed to risk as a result of fluctuations in foreign currency exchange rates from transactions involving foreign operations and currencies. We derive significant revenue, earnings and cash flow from operations outside of the U.S., where business operations are transacted in local currencies.
Inefficiencies in our financial reporting processes due to the conversion to our new ERP could adversely affect our ability to produce accurate financial statements on a timely basis until the new ERP and processes have matured. Additionally, the effectiveness of our internal control over financial reporting could be adversely affected if the new ERP is not successfully implemented. ITEM 1B.
Inefficiencies in our financial reporting processes due to the conversion to our new ERP could adversely affect our ability to produce accurate financial statements on a 18 Table of Contents timely basis until the new ERP and processes have matured.
Beginning in 2022, interest rates have increased substantially and are expected to continue to increase. Rising interest rates could have a dampening effect on overall economic activity and/or the financial condition of our customers, either or both of which could negatively affect customer demand for our products and customers' ability to repay obligations to us.
Periods of rising interest rates could have a dampening effect on overall economic activity and/or the financial condition of our customers, either or both of which could negatively affect customer demand for our products, make it more difficult for customers to cost-effectively secure financing to fund the purchase of new equipment or our customers' ability to repay obligations to us.
Additionally, investors and shareholder advocates are placing ever increasing emphasis on how corporations address ESG issues in their business strategy when making investment decisions and when developing their investment theses and proxy recommendations. Furthermore, many of our peers have more resources to devote to ESG initiatives and may be further ahead than we are on their ESG efforts.
Additionally, investors and shareholder advocates are placing ever increasing emphasis on how corporations address ESG issues in their business strategy when making investment decisions and when developing their investment theses and proxy recommendations.
General economic downturns, including downturns in government infrastructure spending and the commercial and residential construction industries, could result in a material decrease in our revenues and operating results.
General economic downturns, including downturns in government infrastructure spending and the commercial and residential construction industries, could result in a material decrease in our revenues and operating results. Sales of our products are sensitive to the specific locations and regional economies in which they are sold in general, and in particular, changes in commercial construction spending and government infrastructure spending.
Competition for such personnel is intense, and we cannot assure that they will be available when required, or that we will have the ability to attract and retain them. The loss of services of any one or more of these individuals may have a material and adverse effect on our Company and our business prospects.
Competition for such personnel is intense, and we cannot assure that they will be available when required, or that we will have the ability to attract and retain them. The loss of any of these individuals or an inability to attract, retain and maintain additional personnel could prevent us from implementing our business strategy.
In 2022, international sales represented approximately 20.4% of our total sales as compared to 23.1% in 2021. We plan to continue increasing our already significant sales and production efforts in international markets. Both the sales from international operations and export sales are subject in varying degrees to risks inherent in doing business outside of the United States.
Our operations in foreign countries, and continued expansion into additional international markets, could expose us to risks inherent in doing business outside of the United States. In 2023, international sales represented approximately 19.0% of our total sales as compared to 20.4% in 2022. We plan to continue increasing our already significant sales and production efforts in international markets.
The volume and frequency of road and utility construction projects are cyclical; therefore, demand for many of our products is cyclical. The equipment we sell is durable and typically lasts for several years, which also contributes to the cyclical nature of the demand for our products. As a result, we may experience cyclical fluctuations to our revenues and operating results.
The equipment we sell is durable and typically lasts for several years, which also contributes to the cyclical nature of the demand for our products. As a result, we may experience cyclical fluctuations to our revenues and operating results. Any difficulty in managing our manufacturing workflow during downturns in demand could adversely affect our financial results.
Future impairment charges could have a material adverse impact on our results of operations and shareholders' equity. Human Capital Risks Our performance could suffer if we cannot maintain our culture as well as attract, retain and engage our employees. We believe our culture focused on safety, devotion, integrity, respect and innovation, is one of our strongest assets.
Human Capital Risks Our performance could suffer if we cannot maintain our culture as well as attract, retain and engage our employees. We believe our culture focused on safety, devotion, integrity, respect and innovation, is one of our strongest assets. Our strong culture positions us to recruit and retain top-level talent across our organization.
Foreign Corrupt Practices Act, other anti-corruption laws, regulations administered by the U.S. Department of Commerce’s Bureau of Industry and Security, the U.S. Department of Treasury’s Office of Foreign Assets Control and various non-U.S. government entities, including applicable export control regulations, economic sanctions on countries, entities and other persons, customs requirements, currency exchange regulations and transfer pricing regulations.
Department of Treasury’s Office of Foreign Assets Control and various non-U.S. government entities, including applicable import and export control regulations and customs requirements, imposition by the U.S. and foreign governments of additional taxes, tariffs, economic sanctions on countries, entities or persons, embargoes, or other restrictions on trade, currency exchange 16 Table of Contents regulations and transfer pricing regulations.
The design and 14 Table of Conten t s development phase requires meaningful lead time before a product is ready for market, which often requires a significant investment prior to realizing any revenues associated with such new products.
The design and development phase requires meaningful lead time before a product is ready for market, which often requires a significant investment in potentially new technologies and manufacturing techniques to evolve our existing products and introduce new products prior to realizing any revenues associated with such improved or new products. This also requires us to anticipate changing customer demands.
While we have not experienced any material losses relating to cybercrime or other information security breaches to date, there can be no assurance that we will not suffer such significant losses in the future. We may not be able to successfully implement our strategic transformation initiatives, including our new enterprise resource planning system.
While we have not experienced any material losses relating to cybercrime or other information security breaches to date, there can be no assurance that we will not suffer such significant losses in the future. Moreover, as the cybersecurity landscape continues to evolve, the costs associated with our cybersecurity measures and procedures may increase significantly.
Any significant management change involves inherent risk and any failure to ensure the effective transfer of knowledge and a smooth transition could hinder our strategic planning, execution and future performance.
In connection with the recent leadership changes noted above and our strategic initiatives, we have replaced, redirected or hired many employees in key functions, including in important management roles. Any significant management change involves inherent risk and any failure to ensure the effective transfer of knowledge and a smooth transition could hinder our strategic planning, execution and future performance.
Further, any strengthening of the U.S. dollar or any other currency of a country in which we manufacture our products (e.g. the Brazilian real and the South African rand) and/or any weakening of local currencies can increase the cost of our products in foreign markets.
Policies and geopolitical events affecting exchange rates could adversely affect the demand for construction equipment in many areas of the world. Further, any strengthening of the U.S. dollar or any other currency of a country in which we manufacture our products and/or any weakening of local currencies can increase the cost of our products in foreign markets.
It may also make it more difficult for us to hire and retain key employees. In addition, any failure to ensure the effective transfer of knowledge and a smooth transition could hinder our strategic planning, execution and future performance.
In addition, any failure to ensure the effective transfer of knowledge and a smooth transition could hinder our strategic planning, execution and future performance. Our business operations are dependent upon the ability of our new employees to learn their new roles.
Furthermore, we have had recent leadership changes and transitions involving our senior leadership team, including our CEO, as previously announced. Such leadership changes can be inherently difficult to manage, and an inadequate transition may cause disruption to our business, including to our relationships with our customers, suppliers, vendors and employees.
Such leadership changes can be inherently difficult to manage, and an inadequate transition may cause disruption to our business, including to our relationships with our customers, suppliers, vendors and employees. It may also make it more difficult for us to hire and retain key employees.
While we maintain compliance programs to help ensure compliance with such regulations, there is no assurance that we will be effective in complying with all such regulations.
Accordingly, we are at risk to comply with complex international laws and regulations that may change unexpectedly, differ or conflict with laws in other countries in which we conduct business. While we maintain compliance programs to help ensure compliance with such regulations, there is no assurance that we will be effective in complying with all such regulations.
Moreover, we could incur significantly higher costs and longer lead times associated with distributing our products to our customers during the time that it takes for us to reopen or replace a damaged facility. If any of these events were to occur, our financial condition, operating results and cash flows could be materially adversely affected.
Additionally, the equipment and management systems necessary for our manufacturing operations may break down, perform poorly or fail, resulting in fluctuations in manufacturing efficiencies. Moreover, we could incur significantly higher costs and longer lead times associated with distributing our products to our customers during the time that it takes for us to reopen or replace a damaged facility.
The implementation of more restrictive trade policies, such as higher tariffs, duties or charges, in countries where we operate could negatively impact our business, results of operations and financial condition. 12 Table of Conten t s Our operations in foreign countries, and continued expansion into additional international markets, could expose us to risks inherent in doing business outside of the United States.
In addition, unfavorable currency fluctuations could result in our products and services being more expensive than local competitors. The implementation of more restrictive trade policies, such as higher tariffs, duties or charges, in countries where we operate could negatively impact our business, results of operations and financial condition.
We may incur meaningful costs with respect to our ESG efforts and if such efforts are negatively perceived, our reputation and stock price may suffer. 13 Table of Conten t s Manufacturing and Operations Risks Our profitability may be negatively affected by changes in the availability and price of certain parts, components and raw materials.
Manufacturing and Operations Risks Our profitability may be negatively affected by changes in the availability and price of certain parts, components and raw materials. We require access to various parts, components and raw materials at competitive prices in order to manufacture our products.
We have launched a multi-year phased implementation of a standardized enterprise resource planning ("ERP") system across our global organization, which will replace our existing disparate core financial systems. The upgraded ERP will convert our 18 Table of Conten t s internal operations, manufacturing, finance, human capital resources management and customer relationship systems to cloud-based platforms.
We may not be able to successfully implement our strategic transformation initiatives, including our new enterprise resource planning system. We have launched a multi-year phased implementation of a standardized ERP system across our global organization, which will replace our existing disparate core financial systems.
Our future success is partly dependent upon successfully executing and realizing performance improvements, revenue gains, cost savings and other benefits from this initiative. It is possible that we may not fully realize, or sustain, the expected benefits from the OneASTEC business model.
Coupled with our strategic pillars that are aligned to focus on our employees, our customers and our innovation, 13 Table of Contents the OneASTEC business model is centered around continuous improvement. Our future success is partly dependent upon successfully executing and realizing performance improvements, revenue gains, cost savings and other benefits from our initiatives.
Furthermore, the implementation of the OneASTEC initiatives will result in an increase in near-term expenses and may negatively impact operational effectiveness and employee morale. As an innovative leader in the industries in which we operate, we occasionally undertake the engineering, design, manufacturing, construction and installation of equipment systems that are new to the market.
It is possible that we may not fully realize, or sustain, the expected benefits from the OneASTEC business model. Furthermore, the implementation of the OneASTEC initiatives will result in an increase in near-term expenses and may negatively impact operational effectiveness and employee morale.
Sales of our products are sensitive to the specific locations and regional economies in which they are sold in general, and in particular, changes in 11 Table of Conten t s commercial construction spending and government infrastructure spending. In addition, many of our costs are fixed and cannot be quickly reduced in response to decreased demand.
In addition, many of our costs are fixed and cannot be quickly reduced in response to decreased demand.
Our OneASTEC business model is designed around the strategic pillars of Simplify, Focus and Grow. This is a focused effort towards an operating model centered around continuous improvement. The OneASTEC business model was designed to better set strategic direction, define priorities and improve overall operating performance.
Strategic Performance Risks We may not fully sustain targeted performance improvements and other benefits realized from our OneASTEC business model. The OneASTEC business model was designed to better set strategic direction, define priorities and improve overall operating performance.
As of December 31, 2022, there was $19.4 million and $8.7 million of goodwill recorded related to the Materials Solutions and Astec Digital reporting units, respectively. A decrease in our market capitalization, profitability or negative or declining cash flows increases the risk of goodwill or other intangible asset impairments.
A decrease in our market capitalization, profitability or negative or declining cash flows increases the risk of goodwill or other intangible asset impairments. Future impairment charges could have a material adverse impact on our results of operations and shareholders' equity.
We may be unable to do any of the foregoing in a timely manner, upon acceptable terms and conditions, or at all, and the failure to do so could cause us to incur additional costs or lose revenues. Information Technology and Cybersecurity Risks Our operations may be adversely affected by any disruption in our information technology systems.
Information Technology and Cybersecurity Risks Our operations may be adversely affected by any disruption in our information technology systems. Our operations are dependent upon our information technology systems, which encompass all of our major business functions.
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Any difficulty in managing our manufacturing workflow during downturns in demand could adversely affect our financial results. Changes in interest rates could reduce demand for our products. Prior to 2022, global interest rates had been at or near historic lows resulting in historically low financing costs for construction projects.
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Furthermore, the presidential and congressional elections in November 2024 could alter legislative priorities and have a material impact on government funding of infrastructure projects. 11 Table of Contents The cyclical nature of our industry and the product mix of the equipment we sell may cause adverse fluctuations to our revenues and operating results.
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An increase in interest rates could also make it more difficult for customers to cost-effectively fund the purchase of new equipment, which could adversely affect our sales.
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Changes in interest rates and the lack of credit and third-party financing arrangements for our customers could reduce demand for our products. Throughout 2022 and 2023, global interest rates increased substantially from historically low levels, which had facilitated low financing costs for construction projects.
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In addition, unfavorable currency fluctuations could result in our products and services being more expensive than local competitors.
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Our customers’ inability to secure financing for projects on attractive terms could result in the delay, cancellation or downsizing of new purchases which could adversely affect our sales.
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Policies and geopolitical events affecting exchange rates could adversely affect the demand for construction equipment in many areas of the world.
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Both the sales from international operations and export sales are subject in varying degrees to risks inherent in doing business outside of the United States.
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The emergence of the COVID-19 pandemic has significantly impacted our operations. Throughout 2020, our operations were adversely affected by significantly weakened demand for our products given the global economic uncertainty resulting from the pandemic.
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Although we carry property and business interruption insurance, our coverage may not be adequate to compensate us for all losses that may occur. Any of these events individually or in the aggregate could have a material adverse effect on our business, financial condition and operating results.
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While demand for our products has recovered, our operations continue to be adversely affected by the contributory effects of the pandemic, including supply chain disruptions, higher supply costs, including, in particular, higher steel costs, and labor shortages, disruptions and higher labor costs and longer contracting times.
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As an innovative leader in the industries in which we operate, we occasionally undertake the engineering, design, manufacturing, construction and installation of equipment systems and technologies that are new to the market, which could result in our realization of significantly reduced or negative margins and/or a responsibility to reimburse the customer for financial losses, including, but not limited to, the possible refund of the purchase price.
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Future pandemics other than COVID-19 could further impact our operations and might have a material adverse effect on our financial condition, cash flows and results of operations.
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There is no assurance that we will be able to retain our existing management personnel or to attract additional qualified personnel when needed. Furthermore, we have had recent leadership changes and transitions involving our senior leadership team, including our Chief Executive Officer, Group Presidents of both of our Infrastructure Solutions and Materials Solutions segments and General Counsel, as previously announced.
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There is no certainty that current or future measures taken by governmental authorities will be sufficient to mitigate the risks posed by the coronavirus or other viruses, and our ability to perform critical functions could be harmed. Strategic Performance Risks We may not fully sustain targeted performance improvements and other benefits realized from our OneASTEC business model.
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We are subject to various risks related to conducting business domestically and internationally which encompass a wide range of government regulations including but not limited to: the U.S. Foreign Corrupt Practices Act, other anti-corruption laws, regulations administered by U.S. Customs and Border Protection, the U.S. Department of Commerce’s Bureau of Industry and Security, the U.S.
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Estimating the costs of such innovative equipment can be difficult and could result in our realization of significantly reduced or negative margins on such projects.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table lists the principal locations (defined as greater than 20,000 square feet) that are owned or leased by us, as denoted, and which are utilized in our continuing business operations: Location Segment Facility Type/Use Approximate Square Feet United States Chattanooga, Tennessee (1) Infrastructure Solutions Manufacturing/rebuild, offices, training center, warehouse and storage 1,157,384 Yankton, South Dakota (1) Materials Solutions Manufacturing, warehouse and offices 367,292 Chattanooga, Tennessee (1) Corporate and Other Warehouse, hangar and offices 224,100 Eugene, Oregon Materials Solutions Manufacturing and offices 140,300 Eugene, Oregon Infrastructure Solutions Manufacturing and offices 135,920 Burlington, Wisconsin Infrastructure Solutions Manufacturing and offices 112,100 Prairie du Chien, Wisconsin Infrastructure Solutions Manufacturing 100,136 Parsons, Kansas Infrastructure Solutions Manufacturing and offices 91,600 Blair, Nebraska Infrastructure Solutions Manufacturing and offices 90,813 Sterling, Illinois Materials Solutions Manufacturing and offices 67,500 Rossville, Georgia Infrastructure Solutions Manufacturing 40,500 West Columbia, South Carolina (1) Infrastructure Solutions Distribution center 20,400 International Johannesburg, Gauteng, South Africa Materials Solutions Manufacturing and offices 229,000 Omagh, County Tyrone, United Kingdom Materials Solutions Manufacturing and offices 165,000 Vespasiano, Minas Gerais, Brazil Materials Solutions Manufacturing and offices 132,400 Thornbury, Ontario, Canada Materials Solutions Manufacturing and offices 60,500 Acacia Ridge, Queensland, Australia Infrastructure Solutions Offices, service, light fabrication, warehouse and storage 36,000 Marieville, Quebec, Canada (1) Infrastructure Solutions Manufacturing, warehouse, offices and storage 27,495 St-Bruno, Quebec, Canada (1) Infrastructure Solutions Warehouse and offices 21,800 (1) These facilities are partially leased. 19 Table of Conten t s
Biggest changeThe following table lists the principal locations (defined as greater than 20,000 square feet) that are owned or leased by us, as denoted, and which are utilized in our continuing business operations: Location Segment Facility Type/Use Approximate Square Feet United States Chattanooga, Tennessee (1) Infrastructure Solutions Manufacturing/rebuild, offices, training center, warehouse and storage 1,352,384 Yankton, South Dakota Materials Solutions Manufacturing, warehouse and offices 344,995 Eugene, Oregon Materials Solutions Manufacturing and offices 140,300 Eugene, Oregon Infrastructure Solutions Manufacturing and offices 135,920 Burlington, Wisconsin Infrastructure Solutions Manufacturing and offices 112,100 Prairie du Chien, Wisconsin Infrastructure Solutions Manufacturing 100,336 Parsons, Kansas Infrastructure Solutions Manufacturing and offices 91,600 Blair, Nebraska Infrastructure Solutions Manufacturing and offices 90,813 Sterling, Illinois Materials Solutions Manufacturing and offices 67,500 Rossville, Georgia Infrastructure Solutions Manufacturing 40,500 Chattanooga, Tennessee (1) Corporate and Other Offices and hangar 37,006 West Columbia, South Carolina (1) Infrastructure Solutions Distribution center 20,400 International Johannesburg, Gauteng, South Africa Materials Solutions Manufacturing and offices 229,000 Omagh, County Tyrone, United Kingdom (2) Materials Solutions Manufacturing and offices 205,000 Vespasiano, Minas Gerais, Brazil Materials Solutions Manufacturing and offices 132,400 Thornbury, Ontario, Canada Materials Solutions Manufacturing and offices 60,500 Acacia Ridge, Queensland, Australia Infrastructure Solutions Offices, service, light fabrication, warehouse and storage 36,000 Marieville, Quebec, Canada (1) Infrastructure Solutions Manufacturing, warehouse, offices and storage 27,495 St-Bruno, Quebec, Canada (1) Infrastructure Solutions Warehouse and offices 21,800 (1) These facilities are partially leased.
ITEM 2. PROPERTIES As of December 31, 2022, our manufacturing, warehouse and office facilities total approximately 3.4 million square feet of space globally. We believe all properties to be well maintained and adequate for present use, with sufficient capacities for current needs as our business is presently conducted.
ITEM 2. PROPERTIES As of December 31, 2023, our manufacturing, warehouse and office facilities total approximately 3.3 million square feet of space globally. We believe all properties to be well maintained and adequate for present use, with sufficient capacities for current needs as our business is presently conducted.
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(2) Includes a manufacturing facility expansion that was completed during December 2023. 20 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS We are involved in a number of legal proceedings arising in the ordinary course of our business. For a discussion of contingencies related to legal proceedings, see Note 16, Commitments and Contingencies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Biggest changeITEM 3. LEGAL PROCEEDINGS We are involved in a number of legal proceedings arising in the ordinary course of our business. For a discussion of contingencies related to legal proceedings, see Note 16, Commitments and Contingencies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. ITEM 4.
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MINE SAFETY DISCLOSURES None. 21 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe stock performance graph compares the cumulative five-year total return provided to shareholders of Astec Industries, Inc.'s common stock relative to the cumulative total returns of the Russell 2000 index, our broad equity market comparative index, the S&P 600 Industrials index and our defined peer group.
Biggest changeThe stock performance graph compares the cumulative five-year total return provided to shareholders of Astec Industries, Inc.'s common stock relative to the cumulative total returns of the Russell 2000 index, our broad equity market comparative index, and the S&P 600 SmallCap Industrials index. 22 Table of Contents The graph assumes that the value of an investment in our common stock, in the Russell 2000 index and in the S&P 600 SmallCap Industrials index was $100 on December 31, 2018 and assumes reinvestment of all dividends as well as the relative performance of each through December 31, 2023.
The following table details dividends paid per share during 2022 and 2021: (in dollars) 2022 2021 First Quarter $ 0.12 $ 0.11 Second Quarter 0.12 0.11 Third Quarter 0.12 0.11 Fourth Quarter 0.13 0.12 Total $ 0.49 $ 0.45 Dividends are paid when, as and if declared at the discretion of our Board from funds legally available for that purpose.
The following table details dividends paid per share during 2023 and 2022: (in dollars) 2023 2022 First Quarter $ 0.13 $ 0.12 Second Quarter 0.13 0.12 Third Quarter 0.13 0.12 Fourth Quarter 0.13 0.13 Total $ 0.52 $ 0.49 Dividends are paid when, as and if declared at the discretion of our Board from funds legally available for that purpose.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Our common stock is traded on the Nasdaq National Market under the ticker symbol "ASTE". As of February 24, 2023, there were 249 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Our common stock is traded on the Nasdaq National Market under the ticker symbol "ASTE". As of February 23, 2024, there were 242 holders of record of our common stock.
Dividend Policy We paid cash of $11.2 million and $10.2 million for dividends in 2022 and 2021, respectively.
Dividend Policy We paid cash of $11.8 million and $11.2 million for dividends in 2023 and 2022, respectively.
In addition, our payment of dividends may be limited by restrictive covenants in our revolving credit facility agreement.
In addition, our payment of dividends may be limited by restrictive covenants in our revolving credit facility agreement. Performance Graph The stock performance graph below is intended to show our stock performance compared with that of comparable companies.
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Issuer Purchases of Equity Securities The following table provides information with respect to our purchases of our common stock during the three months ended December 31, 2022: (in millions, except share and per share data) Total Number of Shares Purchased Average Price Paid per Share (a) Total Number of Shares Purchased as Part of Publicly Announced Programs (b) Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs (a) November 1, 2022 - November 30, 2022 90,642 $ 44.15 90,642 115.7 Total 90,642 90,642 (a) The average price paid per share includes applicable broker's fees and commissions.
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December 31, (in dollars) 2018 2019 2020 2021 2022 2023 Astec Industries, Inc. 100.00 140.92 196.27 236.43 140.32 130.06 Russell 2000 100.00 125.49 150.50 172.74 137.40 160.59 S&P 600 SmallCap Industrials 100.00 129.64 145.16 182.75 165.57 218.29 ITEM 6. [RESERVED]
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(b) On July 30, 2018, we announced a share repurchase program authorizing the repurchase of up to $150 million of our common stock. Under the authorization, repurchases may be made from time to time in open market transactions, including pursuant to trading plans adopted in accordance with Rule 10b5-1 of the Exchange Act, or in privately negotiated transactions.
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No time limit was set for completion of repurchases under the share repurchase program and the share repurchase program may be suspended or discontinued at any time. Performance Graph The stock performance graph below is intended to show our stock performance compared with that of comparable companies.
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Historically, our second stock performance comparative has been our defined peer group representative of our definitive Proxy peer group ("Peer Group"), which we believe reflects industrial manufacturing companies of comparable size and complexity.
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The ticker symbol of the companies included in our Peer Group are: ALG, AIMC, B, GTLS, CIR, CMCO, CVGI, EPAC, NPO, FSS, GBX, HY, JBT, LNN, MTW, MWA, SHYF, SPXC, SXI and WNC.
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For 2022, we are revising our second comparative to the S&P 600 Industrials index as we believe that this published index is a closer approximation to our industry as a whole as opposed to a smaller selection of peer companies. 21 Table of Conten t s The graph assumes that the value of an investment in our common stock, in the Russell 2000 index, in the S&P 600 Industrials index and in the Peer Group was $100 on December 31, 2017 and assumes reinvestment of all dividends as well as the relative performance of each through December 31, 2022.
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December 31, (in dollars) 2017 2018 2019 2020 2021 2022 Astec Industries, Inc. 100.00 52.06 73.36 102.18 123.09 73.05 Russell 2000 100.00 88.97 111.65 133.90 153.69 122.25 S&P 600 Industrials 100.00 87.85 113.89 127.52 160.55 145.46 Peer Group 100.00 74.66 98.10 110.99 130.89 114.07 ITEM 6. [RESERVED]

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [Reserved] 22 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 22 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 33 Item 8. Financial Statements and Supplementary Data 35 Item 9 . Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 81 Item 9A. Controls and Procedures 81
Biggest changeItem 6. [Reserved] 23 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 23 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 34 Item 8. Financial Statements and Supplementary Data 35 Item 9 . Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 77 Item 9A. Controls and Procedures 77

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSelling, General and Administrative Expenses Selling, general and administrative expenses for 2022 were $216.1 million or 17.0% of net sales compared to $200.6 million or 18.3% of net sales for 2021, an increase of $15.5 million or 7.7%, primarily due to: (i) $12.1 million increased costs related to our SFG transformation program, (ii) $3.2 million of exhibit, promotional and travel costs due to the return of in-person industry conferences and business activities, (iii) $2.8 million incremental expenses associated with MINDS, (iv) $2.0 million of acquisition and integration related costs mainly associated with the acquisition of MINDS and (v) increased net payroll and employee benefit costs due to increased headcount throughout our organization partially offset by lower health insurance claims experience and reduced deferred compensation program costs associated with our stock price changes.
Biggest changeSelling, General and Administrative Expenses Selling, general and administrative expenses for 2023 were $276.4 million, or 20.7% of net sales, compared to $247.6 million, or 19.4% of net sales, for 2022, an increase of $28.8 million, or 11.6%, primarily due to (i) increased net payroll and employee benefit costs of $13.6 million, which was largely driven by general employee cost increases and higher annual incentive compensation costs of $5.5 million, partially offset by lower share-based compensation expense of $3.8 million mainly related to the recovery of share-based compensation expense for awards that were forfeited or modified in conjunction with the termination of our previous Chief Executive Officer ("CEO") and the limited overhead restructuring action implemented in February 2023 and lower health insurance costs of $2.0 million, (ii) a $7.9 million loss contingency recorded related to the 37 BP litigation, (iii) $4.3 million increased consulting, prototype and project costs, (iv) $3.9 million of increased costs related to our strategic transformation program, (v) $2.8 million of higher exhibit and promotional costs primarily due to the ConExpo industry trade show held once every three years and (vi) incremental expenses associated with the acquisition of MINDS Automation Group, Inc.
Certain of our international subsidiaries in South Africa, Australia, Brazil, Canada and the United Kingdom each have separate credit facilities with local financial institutions primarily to finance short-term working capital needs, as well as to cover foreign exchange contracts, performance letters of credit, advance payment and retention guarantees.
Certain of our international subsidiaries in Australia, Brazil, Canada, South Africa and the United Kingdom each have separate credit facilities with local financial institutions primarily to finance short-term working capital needs, as well as to cover foreign exchange contracts, performance letters of credit, advance payment and retention guarantees.
Management continually reviews our organizational structure and operations to ensure they are optimized and aligned with achieving our near-term and long-term operational and profitability targets. In connection with this review, in February 2023, we implemented a limited restructuring plan to right-size and reduce the fixed cost structure of our overhead departments.
Management continually reviews our organizational structure and operations to ensure they are optimized and aligned with achieving our near-term and long-term operational and profitability targets. In connection with this review, in February 2023, we implemented a limited restructuring plan to right-size and reduce the fixed cost structure of certain overhead departments.
Open market prices and tariffs are subject to volatility and determine our cost of steel. During periods when open market prices decline, we may need to reduce the carrying value of the inventory. In addition, certain items in inventory become obsolete over time, and we reduce the carrying value of these items to their net realizable value.
Open market prices are subject to volatility and determine our cost of steel. During periods when open market prices decline, we may need to reduce the carrying value of the inventory. In addition, certain items in inventory become obsolete over time, and we reduce the carrying value of these items to their net realizable value.
In addition, our variable cash uses may include the payment of our quarterly cash dividend, financing other strategic initiatives of our business, including, but not limited to, the SFG transformation, strategic acquisitions and share repurchases under our share repurchase authorization.
In addition, our variable cash uses may include the payment of our quarterly cash dividend, financing other strategic initiatives of our business, including, but not limited to, our strategic transformation initiatives and strategic acquisitions and share repurchases under our share repurchase authorization.
Risk Factors for a discussion of uncertainties and assumptions that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. This section of this Annual Report on Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
Risk Factors for a discussion of uncertainties and assumptions that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. This section of this Annual Report on Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes included in Item 8 of this Annual Report on Form 10-K for the year ended December 31, 2022.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes included in Item 8 of this Annual Report on Form 10-K for the year ended December 31, 2023.
We estimate that our capital expenditures will be between $25 and $35 million for the year ending December 31, 2023, which may be impacted by general economic, financial or operational changes and competitive, legislative and regulatory factors, among other considerations.
We estimate that our capital expenditures will be between $25 and $35 million for the year ending December 31, 2024, which may be impacted by general economic, financial or operational changes and competitive, legislative and regulatory factors, among other considerations.
Recent Accounting Changes and Pronouncements See Note 2, Basis of Presentation and Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for discussion of recently issued accounting pronouncements applicable to us and the impact of those standards on our consolidated financial statements and related disclosures.
Recent Accounting Changes and Pronouncements See Note 2, Basis of Presentation and Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for discussion of recently issued accounting pronouncements applicable to us and the impact of those standards on our consolidated financial statements and related disclosures. 33 Table of Contents
We continue to adjust our production schedules and manufacturing workload distribution, outsource components, implement efficiency improvements and actively modify our recruitment process and compensation and benefits to attract and retain production personnel in our manufacturing facilities. Whenever possible, we attempt to cover increased costs of production by adjusting the prices of our products.
We continue to adjust our production schedules and manufacturing workload distribution, provide comprehensive training, outsource components, implement efficiency improvements and actively modify our recruitment process and compensation and benefits to attract and retain production personnel in our manufacturing facilities. Whenever possible, we attempt to cover increased costs of production by adjusting the prices of our products.
Additionally, the discount rate and the terminal growth rate are based on our judgment of the rates that would be utilized by a hypothetical market participant. We performed a quantitative analysis during 2022 on our four reporting units whereby the fair values of each reporting unit exceeded its carrying value and therefore no indicators of impairment existed.
Additionally, the discount rate and the terminal growth rate are based on our judgment of the rates that would be utilized by a hypothetical market participant. We performed a qualitative analysis during 2023 on our four reporting units whereby the fair values of each reporting unit exceeded its carrying value and therefore no indicators of impairment existed.
In addition, the markets we serve are competitive in nature, and competition limits our ability to pass through cost increases in many cases. Through our operational excellence initiatives, we also strive to minimize the effect of inflation through cost reductions and improved manufacturing efficiencies.
The markets we serve are competitive in nature, and competition limits our ability to pass through cost increases in many cases. Through our 26 Table of Contents operational excellence initiatives, we also strive to minimize the effect of inflation through cost reductions and improved manufacturing efficiencies.
These increases were partially offset by decreased other revenue of $4.5 million primarily driven by increased utilization of our interest subsidy programs offered to some of our dealer customers.
These increases were partially offset by decreased other revenue of $3.9 million primarily driven by increased utilization of our interest subsidy programs offered to some of our dealer customers.
Income Taxes: Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss 32 Table of Conten t s and tax credit carryforwards.
Income Taxes: Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.
Each of the credit facilities are generally guaranteed by Astec Industries, Inc. and/or secured with certain assets of the local subsidiary. We regularly enter into agreements primarily to purchase inventory in the ordinary course of business. As of December 31, 2022, open purchase obligations totaled $330.9 million, of which $324.9 million are expected to be fulfilled within one year.
Each of the credit facilities are generally guaranteed by Astec Industries, Inc. and/or secured with certain assets of the local subsidiary. We regularly enter into agreements primarily to purchase inventory in the ordinary course of business. As of December 31, 2023, open purchase obligations totaled $177.7 million, of which $153.5 million are expected to be fulfilled within one year.
Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. Application of these principles requires us to make estimates and judgments that affect the amounts as reported in the consolidated financial statements.
Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with U.S. GAAP. Application of these principles requires us to make estimates and judgments that affect the amounts as reported in the consolidated financial statements. Accounting policies involving estimates that are critical to our financial statements are described below.
An increase or decrease in the price of oil impacts the cost of asphalt, which is likely to alter demand for asphalt and therefore affect demand for certain of our products.
Liquid asphalt is a by-product of oil refining. An increase or decrease in the price of oil impacts the cost of asphalt, which is likely to alter demand for asphalt and therefore affect demand for certain of our products.
Our products are used in each phase of road building, from quarrying and crushing the aggregate to application of the road surface for both asphalt and concrete.
Our products are used in each phase of road building, from quarrying and crushing the aggregate to application of the road surface.
Cash Flows The following table summarizes cash flows during the years ended December 31, 2022 and 2021, respectively: Years Ended December 31, (in millions) 2022 2021 Net cash (used in) provided by operating activities $ (73.9) $ 7.4 Net cash used in investing activities (53.2) (18.4) Net cash provided by (used in) financing activities 60.1 (12.1) Effect of exchange rates on cash (1.4) (1.1) Decrease in cash and cash equivalents and restricted cash (68.4) (24.2) Cash, cash equivalents and restricted cash, end of period $ 66.0 $ 134.4 Net cash (used in) provided by operating activities Our operating activities were a $73.9 million net use of cash during 2022 as compared to providing net cash of $7.4 million during 2021.
Cash Flows The following table summarizes cash flows during the years ended December 31, 2023 and 2022, respectively: Years Ended December 31, (in millions) 2023 2022 Net cash provided by (used in) operating activities $ 27.8 $ (73.9) Net cash used in investing activities (12.9) (53.2) Net cash (used in) provided by financing activities (18.3) 60.1 Effect of exchange rates on cash 0.6 (1.4) Decrease in cash, cash equivalents and restricted cash (2.8) (68.4) Cash, cash equivalents and restricted cash, end of period $ 63.2 $ 66.0 Net cash provided by (used in) operating activities Our operating activities provided net cash of $27.8 million during 2023 as compared to a net use of $73.9 million in cash during 2022.
We also manufacture certain equipment and components unrelated to road construction, including equipment for the mining, quarrying, construction and demolition industries and port and rail yard operators; industrial heat transfer equipment; commercial whole-tree pulpwood chippers; horizontal grinders; blower trucks; commercial and industrial burners; and combustion control systems.
We also offer industrial automation controls and telematics platforms as well as manufacture certain equipment and components unrelated to road construction, including equipment for the mining, quarrying, construction, demolition, land clearing and recycling industries and port and rail yard operators; industrial heat transfer equipment; commercial whole-tree pulpwood chippers; horizontal grinders; blower trucks; commercial and industrial burners; and combustion control systems.
Some of the inputs used in the impairment testing are highly subjective and are affected by changes in business factors and other conditions. Changes in any of the inputs could have an effect on future tests and result in impairment charges.
Risk Factors section of this Annual Report on Form 10-K. Some of the inputs used in the impairment testing are highly subjective and are affected by changes in business factors and other conditions. Changes in any of the inputs could have an effect on future tests and result in impairment charges.
However, we anticipate that steel demand will remain relatively strong in 2023, driven by the IIJA domestically and impacted by international production capacity being restricted by the conflict in Ukraine. We continue to employ flexible strategies to ensure supply and minimize the impact of price volatility.
We anticipate that steel demand will remain relatively stable in 2024, driven by the IIJA domestically and impacted by international production capacity. We continue to employ flexible strategies to ensure supply and minimize the impact of price volatility.
Entering 2023, oil prices continue to remain at relatively high levels with price volatility making it difficult to predict the costs of oil-based products used in road construction such as liquid asphalt and gasoline. Oil prices have routinely fluctuated in recent years and are expected to continue to fluctuate in the future.
Price volatility continues to make it difficult to predict the costs of oil-based products used in road construction such as liquid asphalt and gasoline. Oil prices have routinely fluctuated in recent years and are expected to continue to fluctuate in the future.
Based on the current macroeconomic environment, including the ongoing impact of the conflict in Ukraine, we anticipate that oil prices will remain at relatively high levels in 2023. Steel is a major component of our equipment.
Based on the current macroeconomic environment, including ongoing international conflicts, we anticipate that oil prices will remain at relatively high levels throughout 2024. Steel is a major component of our equipment.
As of December 31, 2022, our total liquidity was $232.0 million, consisting of $62.8 million of cash and cash equivalents available for operating purposes and $169.2 million available for additional borrowings under our revolving credit facility, to the extent our compliance with financial covenants permits such borrowings.
As of December 31, 2023, our total liquidity was $234.5 million, consisting of $59.8 million of cash and cash equivalents available for operating purposes and $174.7 million available for additional borrowings under our revolving credit facility, to the extent our compliance with financial covenants permits such borrowings.
The financial condition and results of operations discussed in this Management's Discussion and Analysis of Financial Condition and Results of Operations are those of Astec Industries, Inc. and its consolidated subsidiaries, collectively, the "Company," "Astec," "we," "our" or "us." Business Overview We design, engineer, manufacture and market equipment and components used primarily in road building and related construction activities, as well as certain other products.
Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2022 . 23 Table of Contents The financial condition and results of operations discussed in this Management's Discussion and Analysis of Financial Condition and Results of Operations are those of Astec Industries, Inc. and its consolidated subsidiaries, collectively, the "Company," "Astec," "we," "our" or "us." Business Overview We design, engineer, manufacture, market and service equipment and components used primarily in asphalt and concrete road building and related construction activities, as well as certain other products.
Ruffalo's employment as President and Chief Executive Officer was terminated and he was succeeded by Mr. Jaco van der Merwe. In accordance with the terms of Mr. Ruffalo's separation agreement, we recorded $4.4 million of restructuring related costs in the fourth quarter of 2022. Additional costs are anticipated to be incurred in the first quarter of 2023 for this separation.
Ruffalo's employment as President and Chief Executive Officer was terminated and he was succeeded by Mr. Jaco van der Merwe. In accordance with the terms of Mr. Ruffalo's separation agreement, we recorded $1.8 million of restructuring costs during the first quarter of 2023 related to the modification of Mr.
We have materially completed the ERP global design in 2022, launched the human capital resources module throughout our domestic sites in January 2023 and expect to convert the operations of one manufacturing site along with Corporate in 2023 to set the foundation before accelerating the implementation at additional manufacturing sites.
We materially completed the ERP global design in 2022, launched the human capital resources module in our locations in the United States in January 2023 and converted the operations of one manufacturing site along with Corporate during the second quarter of 2023 to set the foundation before accelerating the implementation at additional sites in 2024 and 2025.
An implementation of this scale is a major financial undertaking and has required, and will continue to require, substantial time and attention of management and key employees.
An implementation of this scale is a major financial undertaking and requires substantial time and attention of management and key employees.
Income Tax Provision Income tax expense for the year ended December 31, 2022 was $5.0 million, reflecting a 113.6% effective tax rate compared to an income tax benefit of $2.1 million for the year ended December 31, 2021, reflecting a (15.2)% effective tax rate.
Income Tax Provision Income tax expense for the year ended December 31, 2023 was $9.1 million, reflecting a 21.3% effective tax rate, compared to $5.0 million for the year ended December 31, 2022, reflecting a 113.6% effective tax rate.
Corporate and Other Corporate and Other operations had net expenses of $46.5 million for 2022 compared to $48.2 million for 2021, a decrease of $1.7 million or 3.5%.
Corporate and Other Corporate and Other operations had net expenses of $44.9 million for 2023 compared to $46.5 million for 2022, a decrease of $1.6 million or 3.4%.
See Note 2, Basis of Presentation and Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K, for a description of our process used to value inventories at the lower of first-in first-out cost or net realizable value.
These and other accounting policies are more fully described in Note 2, Basis of Presentation and Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. Inventory Valuation: Inventories are valued at the lower of first-in, first-out cost or net realizable value. The most significant component of our inventories is steel.
Increased research and development costs were primarily driven by higher prototype materials costs and increased personnel-related expenses. 26 Table of Conten t s Restructuring, Impairment and Other Asset Charges, Net Restructuring, asset impairment charges and the net gain on the sale of property and equipment for the years ended December 31, 2022 and 2021 are presented below and relate primarily to our SFG initiatives and recent leadership change: Years Ended December 31, (in millions) 2022 2021 Restructuring charges: Costs associated with leadership change $ 4.4 $ — Costs associated with closing Enid 1.0 0.7 Costs associated with closing Tacoma 0.8 1.6 Costs associated with closing Mequon — 0.6 Total restructuring related charges 6.2 2.9 Asset impairment charges: Other impairment charges 3.5 0.2 Total asset impairment charges 3.5 0.2 Gain on sale of property and equipment, net: Gain on sale of property and equipment, net (0.7) (0.6) Total gain on sale of property and equipment, net (0.7) (0.6) Restructuring, impairment and other asset charges, net $ 9.0 $ 2.5 See Note 22, Strategic Transformation and Restructuring, Impairment and Other Asset Charges, of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for discussion of the individual restructuring actions taken and the impairment charges recorded.
These increases were partially offset by lower amortization expense of $3.3 million and reduced acquisition and integration related costs of $2.1 million primarily associated with the acquisition of MINDS. 27 Table of Contents Restructuring, Impairment and Other Asset Charges, Net Restructuring, asset impairment charges and the net gains on the sale of property and equipment for the years ended December 31, 2023 and 2022 are presented below: Years Ended December 31, (in millions) 2023 2022 Restructuring charges: Costs associated with leadership change and overhead restructuring $ 7.3 $ 4.4 Costs associated with exited operations - Enid 0.4 1.0 Costs associated with closing Tacoma — 0.8 Total restructuring related charges 7.7 6.2 Asset impairment charges: Other impairment charges 1.2 3.5 Total asset impairment charges 1.2 3.5 Gain on sale of property and equipment, net: Gain on sale of property and equipment, net (3.1) (0.7) Total gain on sale of property and equipment, net (3.1) (0.7) Restructuring, impairment and other asset charges, net $ 5.8 $ 9.0 See Note 21, Strategic Transformation and Restructuring, Impairment and Other Asset Charges, of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for discussion of the individual restructuring actions taken and the impairment charges recorded.
These increases were partially offset by lower used equipment sales of $2.7 million. International sales for the Infrastructure Solutions segment increased $0.6 million, or 0.4%, for 2022 compared to 2021 primarily due to increased parts and component sales of $2.2 million partially offset by lower equipment sales of $1.7 million.
Domestic sales for the Infrastructure Solutions segment increased by $40.0 million, or 5.7%, for 2023 compared to 2022 primarily due to increases in (i) service and equipment installation revenue of $21.9 million, (ii) parts and component sales of $17.4 million and (iii) equipment sales of $3.6 million. These increases were partially offset by lower used equipment sales of $3.1 million.
The Credit Agreement provides for (i) a revolving credit facility (consisting of revolving credit loans and swingline loans) and a letter of credit facility, in an aggregate amount of up to $250.0 million, (ii) an incremental credit facility in an aggregate amount not to exceed $125.0 million (the “Credit Facilities”) and (iii) a maturity date of December 19, 2027. 29 Table of Conten t s We had $78.0 million in outstanding borrowings under the Credit Facilities at December 31, 2022 and no outstanding borrowings on the Previous Credit Facility at December 31, 2021.
The Credit 30 Table of Contents Agreement provides for (i) a revolving credit facility (consisting of revolving credit loans and swingline loans) and a letter of credit facility, in an aggregate amount of up to $250.0 million, (ii) an incremental credit facility in an aggregate amount not to exceed $125.0 million (the "Credit Facilities") and (iii) a maturity date of December 19, 2027.
These decreases were partially offset by increases in internal headcount and share-based compensation expenses of $2.8 million. Liquidity and Capital Resources Our primary sources of liquidity and capital resources are cash and cash equivalents on hand, borrowing capacity under a $250.0 million revolving credit facility and cash flows from operations.
Liquidity and Capital Resources Our primary sources of liquidity and capital resources are cash and cash equivalents on hand, borrowing capacity under a $250.0 million revolving credit facility and cash flows from operations.
The backlog increased $117.8 million to $567.1 million in the Infrastructure Solutions segment and increased $27.9 million to $341.2 million in the Materials Solutions segment. The Corporate and Other backlog represents our controls and automation business and totaled $4.4 million as of December 31, 2022.
The backlog decreased $162.5 million to $404.6 million in the Infrastructure Solutions segment and decreased $178.5 million to $162.7 million in the Materials Solutions segment. The Corporate and Other backlog represents our controls and automation business and totaled $2.5 million as of December 31, 2023, a decrease of $1.9 million.
Our future cash requirements primarily include working capital needs, debt service obligations, capital expenditures, vendor hosted software arrangements including the related implementation costs, unrecognized tax benefits and operating lease payments.
Our foreign subsidiaries held $25.1 million of cash and cash equivalents available for operating purposes which is considered to be indefinitely invested in those jurisdictions. Our future cash requirements primarily include working capital needs, debt service obligations, capital expenditures, vendor hosted software arrangements including the related implementation costs, unrecognized tax benefits and operating lease payments.
Additionally, at December 31, 2022, we have capitalized $17.8 million in deferred implementation costs associated with the ERP implementation that will be amortized ratably over the remaining contract term once the ERP is ready for use, of which $1.2 million and $16.6 million were included in "Prepaid expenses and other assets" and "Other long-term assets" in the Consolidated Balance Sheets, respectively.
Capitalized implementation costs totaled $17.8 million, of which $1.2 million and $16.6 million were included in "Prepaid expenses and other assets" and "Other long-term assets", respectively, in the Consolidated Balance Sheets as of December 31, 2022.
The increase was primarily driven by favorable net volume, pricing and the mix of sales that generated increased (i) new equipment sales of $78.4 million, (ii) parts and component sales of $20.3 million, (iii) service and equipment installation revenue of $5.3 million and (iv) freight revenue of $2.6 million.
The increase in net sales was primarily driven by favorable pricing partially offset by net unfavorable volume and mix that generated increases in (i) equipment sales of $29.9 million, (ii) service and equipment installation revenue of $27.9 million and (iii) parts and component sales of $14.5 million. These increases were partially offset by decreased used equipment sales of $5.6 million.
Backlog The backlog of orders at December 31, 2022 was $912.7 million compared to $762.6 million at December 31, 2021, an increase of $150.1 million or 19.7%. Domestic and international backlogs increased $146.3 million or 23.3% and $3.8 million or 2.8%, respectively.
Backlog The backlog of orders at December 31, 2023 was $569.8 million compared to $912.7 million at December 31, 2022, a decrease of $342.9 million, or 37.6%. Domestic and international backlogs decreased $323.2 million, or 41.8%, and $19.7 million, or 14.1%, respectively.
The increase in Segment Operating Adjusted EBITDA resulted primarily from the impact of favorable volume, pricing and mix that generated $51.3 million higher gross profit partially offset by the impact of higher inflation on materials, labor and overhead costs of $37.2 million and manufacturing inefficiencies $7.9 million due to supply chain and logistics disruptions.
The increase in Segment Operating Adjusted EBITDA resulted primarily from the impact of favorable pricing partially offset by net unfavorable volume and mix that generated $73.8 million higher gross profit and manufacturing efficiencies of $2.8 million.
The higher demand has contributed to longer lead times. 27 Table of Conten t s Net Sales by Segment Years Ended December 31, (in millions) 2022 2021 $ Change % Change Infrastructure Solutions $ 847.4 $ 743.4 $ 104.0 14.0 % Materials Solutions $ 422.7 $ 352.1 $ 70.6 20.1 % Corporate and Other $ 4.4 $ — $ 4.4 100.0 % Infrastructure Solutions Sales in this segment were $847.4 million for 2022 compared to $743.4 million for 2021, an increase of $104.0 million, or 14.0%.
Net Sales by Segment Years Ended December 31, (in millions) 2023 2022 $ Change % Change Infrastructure Solutions $ 878.8 $ 847.4 $ 31.4 3.7 % Materials Solutions $ 450.0 $ 422.7 $ 27.3 6.5 % Corporate and Other $ 9.4 $ 4.4 $ 5.0 113.6 % Infrastructure Solutions Sales in this segment were $878.8 million for 2023 compared to $847.4 million for 2022, an increase of $31.4 million, or 3.7%.
International sales for the Materials Solutions segment increased $4.1 million or 3.7% for 2022 compared to 2021 primarily due to increased parts and component sales of $6.7 million partially offset by lower new equipment sales of $3.0 million. Corporate and Other Sales in this segment represent our controls and automation business acquired in April 2022.
International sales for the Materials Solutions segment decreased $0.5 million, or 0.4%, for 2023 compared to 2022 primarily due to decreased new and used equipment sales of $2.6 million and $2.2 million, respectively, partially offset by higher service and equipment installation revenue of $4.6 million. Corporate and Other Corporate and Other sales are generated from our controls and automation business.
See Note 19, Operations by Industry Segment and Geographic Area, of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for a reconciliation of Segment Operating Adjusted EBITDA to total consolidated net income attributable to controlling interest. 28 Table of Conten t s Years Ended December 31, (in millions) 2022 2021 $ Change % Change Infrastructure Solutions $ 73.0 $ 73.9 $ (0.9) (1.2) % Materials Solutions $ 44.5 $ 39.1 $ 5.4 13.8 % Corporate and Other $ (46.5) $ (48.2) $ 1.7 3.5 % Infrastructure Solutions Segment Operating Adjusted EBITDA for the Infrastructure Solutions segment was $73.0 million for 2022 compared to $73.9 million for 2021, a decrease of $0.9 million or 1.2%.
See Note 19, Operations by Industry Segment and Geographic 29 Table of Contents Area, of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for a reconciliation of Segment Operating Adjusted EBITDA to total consolidated net income attributable to controlling interest.
Due to the increased borrowings under our Credit Facilities and higher interest rates, we expect our interest expense in 2023 to be significantly higher than in prior years. Our Brazilian subsidiary maintains a separate term loan for working capital purposes with a bank in Brazil, which is secured by its manufacturing facility.
Our Brazilian subsidiary maintains a separate term loan for working capital purposes with a bank in Brazil, which is secured by its manufacturing facility.
Included in these net increases is $4.4 million of incremental net sales from an acquired business. Sales reported by our foreign subsidiaries in U.S. dollars for 2022 would have been $18.6 million higher had foreign exchange rates been the same as the 2021 rates.
Sales reported by our foreign subsidiaries in U.S. dollars for 2023 would have been $8.1 million higher had foreign exchange rates been the same as the 2022 rates. Domestic sales for 2023 were $1,083.4 million, or 81.0% of net sales, compared to $1,014.3 million, or 79.6% of net sales, for 2022, an increase of $69.1 million, or 6.8%.
The transfer of the manufacturing and marketing of Tacoma product lines to other facilities within the Infrastructure Solutions segment was completed during the first quarter of 2022.
The transfer of the manufacturing and marketing of Tacoma product lines to other facilities within the Infrastructure Solutions segment was completed during the first quarter of 2022. The Tacoma facility's land, building and certain equipment assets of $15.4 million were included in "Assets held for sale" in the Consolidated Balance Sheets as of December 31, 2022.
Our effective tax rates are affected by recurring items which are generally consistent from period to period, as well as discrete items that may occur but are not consistent from period to period.
Our effective tax rates are affected by recurring items which are generally consistent from period to period, as well as discrete items that may occur but are not consistent from period to period. The item having the most significant impact on the effective tax rate for 2023 is a net benefit of $1.8 million for research and development tax credits.
International sales for 2022 were $260.2 million or 20.4% of net sales compared to $253.4 million or 23.1% of net sales for 2021, an increase of $6.8 million or 2.7%. International sales increased primarily due to higher parts and component sales and service revenue of $9.0 million and $2.4 million, respectively.
International sales for 2023 were $254.8 million, or 19.0% of net sales, compared to $260.2 million, or 20.4% of net sales, for 2022, a decrease of $5.4 million, or 2.1%. International sales decreased primarily due to lower equipment sales of $7.1 million partially offset by higher service and equipment installation revenue of $5.8 million.
The Credit Agreement contains certain financial covenants, including requirements related to our Consolidated Total Net Leverage Ratio and Consolidated Interest Coverage Ratio, each as defined in the agreement. Failure to satisfy these covenants could result in the accelerated repayment of our indebtedness. We were in compliance with the financial covenants of the Credit Facilities at December 31, 2022.
We anticipate continuing to utilize the Credit Facilities with more frequency in the near-term to support our working capital needs. The Credit Agreement contains certain financial covenants, including requirements related to our Consolidated Total Net Leverage Ratio and Consolidated Interest Coverage Ratio, each as defined in the agreement.
We substantially completed the design efforts for this project during 2022. We also began executing investments to acquire and install manufacturing equipment intended to drive increased efficiencies in our production processes. We plan to continue these capital investments during 2023, which are anticipated to be completed by the end of the year.
We also began executing investments to acquire and install manufacturing equipment intended to drive increased efficiencies in our production processes. We have continued these capital investments during 2023, which are largely completed as of December 31, 2023. Gross margin improvements are expected to be realized in conjunction with the project completion in early to mid-2024.
We continue to develop products and initiatives to reduce the amount of oil and related products required to produce asphalt. Oil prices increased throughout 2021 and 2022, reaching a peak in the third quarter and subsequently stabilizing during the fourth quarter of 2022.
We continue to develop products and initiatives to reduce the amount of oil and related products required to produce asphalt. While oil prices had declined from the peak prices in 2022, throughout 2023 they have remained at relatively high levels.
In addition, many of our markets are highly competitive, and our products compete worldwide with similar products produced and sold by a number of other manufacturers and dealers. We ended 2021 with a strong backlog of orders, which continued to grow during 2022, but at a slower pace than we experienced during the prior year.
In addition, many of our markets are highly competitive, and our products compete worldwide with similar products produced and sold by a number of other manufacturers and dealers. Backlog represents the dollar value of firm orders for equipment, parts and related installation which are expected to be recognized in net sales in the future.
We anticipate incurring total costs associated with the ERP implementation in the range of $125 to $150 million, with an estimated $25 to $30 million incurred per year beginning in 2022. 23 Table of Conten t s In addition, in the first quarter of 2022, a lean manufacturing initiative at one of our largest sites was initiated and is expected to drive improvement in gross margin at that site.
In addition, in the first quarter of 2022, a lean manufacturing initiative at one of our largest sites was initiated and is expected to drive improvement in gross margin at that site. We substantially completed the design efforts for this project during 2022.
Intangible assets with definite lives are tested for impairment if conditions exist that indicate the carrying value may not be recoverable.
As of December 31, 2023 and 2022 the net carrying amount of goodwill was $46.3 million and $45.2 million, respectively. No goodwill impairment charges were recognized in 2023, 2022 or 2021. Intangible assets with definite lives are tested for impairment if conditions exist that indicate the carrying value may not be recoverable.
Materials Solutions Segment Operating Adjusted EBITDA for the Materials Solutions segment was $44.5 million for 2022 compared to $39.1 million for 2021, an increase of $5.4 million or 13.8%.
Years Ended December 31, (in millions) 2023 2022 $ Change % Change Infrastructure Solutions $ 105.8 $ 73.0 $ 32.8 44.9 % Materials Solutions $ 50.8 $ 44.5 $ 6.3 14.2 % Corporate and Other $ (44.9) $ (46.5) $ 1.6 3.4 % Infrastructure Solutions Segment Operating Adjusted EBITDA for the Infrastructure Solutions segment was $105.8 million for 2023 compared to $73.0 million for 2022, an increase of $32.8 million, or 44.9%.
These increases were partially offset by decreased other revenue of $4.5 million primarily driven by increased utilization of our interest subsidy programs offered to certain of our dealer customers.
Domestic sales for the Materials Solutions segment increased $27.8 million, or 9.1%, for 2023 compared to 2022 primarily due to increased equipment sales of $32.8 million partially offset by decreased other revenue of $3.7 million primarily driven by increased utilization of our interest subsidy programs offered to certain of our dealer customers.
Gross Profit Consolidated gross profit for 2022 was $264.1 million or 20.7% of net sales as compared to $249.5 million or 22.8% of net sales in 2021, an increase of $14.6 million or 5.9%. The increase was primarily driven by the impact of net favorable volume, pricing and mix that generated $131.8 million higher gross profit.
Materials Solutions Segment Operating Adjusted EBITDA for the Materials Solutions segment was $50.8 million for 2023 compared to $44.5 million for 2022, an increase of $6.3 million, or 14.2%. The increase in Segment Operating Adjusted EBITDA resulted primarily from the impact of favorable pricing that generated $31.7 million higher gross profit.
Our multi-year phased implementation of a standardized ERP system across our global organization will replace much of our existing disparate core financial systems. The upgraded ERP will initially convert our internal operations, manufacturing, finance, human capital resources management and customer relationship systems to cloud-based platforms.
The upgraded ERP will initially convert our internal operations, manufacturing, finance, human capital resources management and customer relationship systems to cloud-based platforms. This new ERP system will provide for standardized processes and integrated technology solutions that enable us to better leverage automation and process efficiency.
The IIJA allocates $548 billion in government spending to new infrastructure over the five-year period concluding in 2026, with certain amounts specifically allocated to fund highway and bridge projects. We believe that multi-year highway programs (such as the IIJA) will have the greatest positive impact on the road construction industry and allow our customers to plan and execute longer-term projects.
The U.S. government enacted the Infrastructure Investment and Jobs Act ("IIJA") in November 2021 as a replacement for the prior program. The IIJA allocates $548 billion in government spending to new infrastructure over the five-year period concluding in 2026, with certain amounts specifically allocated to fund highway and bridge projects.
A similar discussion of 2020 items and year-to-year comparisons between 2021 and 2020 can be found 22 Table of Conten t s in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2021 .
A similar discussion of 2021 items and year-to-year comparisons between 2022 and 2021 can be found in Part II, Item 7.
These reductions are determined by management based on estimates, assumptions and judgments made from the information available at that time.
These reductions are determined by management based on estimates, assumptions and judgments made from the information available at that time. We do not believe it is reasonably likely that the inventory values will materially change in the near future. Product Warranty Reserves: We accrue for the estimated cost of product warranties at the time revenue is recognized.
We have certain sales orders on which we record revenue over time based upon the ratio of costs incurred to estimated total costs. Goodwill and Other Intangible Assets: Goodwill is tested for impairment annually on October 1, or more frequently, if events or circumstances indicate that the carrying amount of the asset may not be recoverable.
A change in these estimates could materially impact the amount capitalized, the associated amortization expense in subsequent periods and the amount of expenses recognized in current periods that do not qualify for capitalization. 32 Table of Contents Goodwill and Other Intangible Assets Impairment: Goodwill is tested for impairment annually on October 1, or more frequently, if events or circumstances indicate that the carrying amount of the asset may not be recoverable.
Significant portions of our revenues from the Infrastructure Solutions segment relate to the sale of equipment involved in the production, handling, recycling or application of asphalt mix. Liquid asphalt is a by-product of oil refining.
We believe that multi-year highway programs (such as the IIJA) have a positive impact on the domestic road construction industry. Significant portions of our revenues from the Infrastructure Solutions segment relate to the sale of equipment involved in the production, handling, recycling or application of asphalt mix and, to a lesser extent, concrete as surface choices for roads and highways.
This decrease is primarily due to: (i) higher net cash usages in our operating assets and liabilities of $49.1 million mainly driven by the increase of inventories on hand of $44.9 million due to higher backlog and supply chain disruptions and (ii) lower net income adjusted for non-cash items of $33.7 million.
This increase is primarily due to reduced net cash usages from our operating assets and liabilities of $60.7 million and higher net income reduced by non-cash charges of $41.8 million.
Our current liabilities increased to $274.0 million at December 31, 2022 from $223.3 million at December 31, 2021, an increase of $50.7 million or 22.7%.
Our current liabilities increased to $299.0 million at December 31, 2023 from $274.0 million at December 31, 2022, an increase of $25.0 million, or 9.1%, primarily due to increases of $9.7 million in accounts payable, $8.8 million in accrued employee related liabilities and $4.6 million in accrued product warranty.
The increase in net sales was primarily driven by changes in the volume, pricing and mix of sales that generated increases in (i) equipment sales of $141.1 million, (ii) parts and component sales of $34.6 million, (iii) service and equipment installation revenue of $7.1 million and (iv) freight revenue of $4.2 million partially offset by decreased used equipment sales of $4.2 million and other revenue of $3.8 million primarily driven by higher utilization of our interest subsidy programs offered to certain of our dealer customers.
The increase was primarily driven by favorable pricing partially offset by net unfavorable volume and mix that generated increased service and equipment installation revenue and parts and component sales of $23.0 million and $15.9 million, respectively. These increases were partially offset by lower new and used equipment sales of $4.4 million and $3.4 million, respectively.
Executive Summary Highlights of our financial results as of and for the year ended December 31, 2022 as compared to the prior year include the following: • Net sales were $1,274.5 million, an increase of 16.3% • Gross profit was $264.1 million, an increase of 5.9% • Income from operations decreased $12.4 million to $7.5 million • Net income attributable to Astec decreased to a loss of $0.1 million • Diluted earnings per share were zero, a decrease of 100.0% • Backlog of $912.7 million, an increase of 19.7% Significant Items Impacting Financial Results in 2022 Simplify, Focus and Grow Strategic Transformation ("SFG") Our ongoing strategic transformation initiative focused on implementing new business strategies and operating structure is concentrated on aligning our operations under the OneASTEC business model with the strategic pillars of Simplify, Focus and Grow.
Executive Summary Highlights of our financial results as of and for the year ended December 31, 2023 as compared to the prior year include the following: • Net sales were $1,338.2 million, an increase of 5.0% • Gross profit was $330.8 million, an increase of 25.3% • Income from operations increased $41.1 million to $48.6 million • Net income attributable to Astec increased $33.6 million to $33.5 million • Diluted earnings per share were $1.47, an increase of 100.0% • Backlog of $569.8 million, a decrease of 37.6% Significant Items Impacting Financial Results in 2023 Strategic Transformation Program We are undergoing a multi-year phased implementation of a standardized enterprise resource planning ("ERP") system across our global organization, which will replace much of our existing disparate core financial systems.
Costs incurred during the year ended December 31, 2022 were $25.5 million, which represent costs directly associated with the SFG initiatives and which cannot be capitalized in accordance with U.S. GAAP. These costs are included in "Selling, general and administrative expenses" in the Consolidated Statements of Operations.
Costs totaling of $25.5 million and $13.4 million were incurred in 2022 and 2021, respectively, and are recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations.
These increased costs were partially offset by the impact of favorable net volume, pricing and mix that generated $80.5 million higher gross profit and reduced expenses related to closed site locations of $2.0 million.
The increase was primarily driven by favorable pricing partially offset by net unfavorable volume and mix that generated $104.8 million higher gross profit and $2.3 million of gross profit generated by an acquired business. These increases were partially offset by the impact of inflation on materials, labor and overhead of $40.8 million.
Our outstanding letters of credit totaling $2.8 million decreased borrowing availability to $169.2 million under the revolving credit facility as of December 31, 2022. We anticipate continuing to utilize the Credit Facilities with more frequency in the near-term to support our domestic working capital needs in response to supply chain disruptions.
We had $72.0 million and $78.0 million in outstanding borrowings under the Credit Facilities at December 31, 2023 and 2022, respectively. Our outstanding letters of credit totaling $3.3 million decreased borrowing availability to $174.7 million under the revolving credit facility as of December 31, 2023.
Domestic sales increased primarily due to: (i) $144.3 million higher equipment sales (ii) $25.6 million higher parts and component sales, (iii) $4.7 million higher service and equipment installation revenue and (iv) $4.7 million higher freight revenue.
Domestic sales increased primarily due to increases in (i) equipment sales of $37.0 million, (ii) service and equipment installation revenue of $22.1 million and (iii) parts and components sales of $16.1 million. These increases were partially offset by decreased used equipment sales of $3.1 million.
As of December 31, 2022, $115.7 million remains available for repurchase under the approved share repurchase program. Closure of Tacoma Facility In January 2021, we announced plans to close the Tacoma facility in order to simplify and consolidate operations. The Tacoma facility ceased manufacturing operations at the end of 2021.
Amortization of these capitalized implementation costs totaled $1.9 million during 2023, which is included in "Selling, general and administrative expenses" in the Consolidated Statements of Operations. Tacoma Site Closure In January 2021, we announced plans to close the Tacoma facility in order to simplify and consolidate operations. The Tacoma facility ceased manufacturing operations at the end of 2021.
We combine and aggregate components of an operating segment as a single reporting unit if the components have similar economic characteristics. Goodwill is tested for impairment by either performing a qualitative evaluation or a quantitative test.
Goodwill is allocated to, and evaluated for impairment at, four identified reporting units. Goodwill is tested for impairment by either performing a qualitative evaluation or a quantitative test.
Materials Solutions Sales in this segment were $422.7 million for 2022 compared to $352.1 million for 2021, an increase of $70.6 million or 20.1%. The increase was primarily driven by favorable net volume, pricing and the mix of sales that generated increased new equipment and parts and component sales of $59.1 million and $14.1 million, respectively.
International sales for the Infrastructure Solutions segment decreased $8.6 million, or 6.0%, for 2023 compared to 2022 primarily due to decreased equipment sales of $8.0 million. Materials Solutions Sales in this segment were $450.0 million for 2023 compared to $422.7 million for 2022, an increase of $27.3 million, or 6.5%.
These increases were partially offset by decreased cash, cash equivalents and restricted cash of $68.4 million, the net sale of short-term trading securities of $4.7 million and decreased prepaid and refundable income taxes of $4.6 million. Accounts receivable days outstanding decreased from 50.3 in 2021 to 44.5 in 2022.
This increase was partially offset by decreased trade and other net receivables and contract assets of $20.9 million, the sale of our Tacoma site previously recorded as "Assets held for sale" for $15.4 million and decreased cash, cash equivalents and restricted cash of $2.8 million. Accounts receivable days outstanding decreased from 44.5 in 2022 to 40.7 in 2023.
These increases were partially offset by the impact of inflation on materials, labor and overhead of $104.0 million and manufacturing inefficiencies of $14.9 million largely due to logistics and manufacturing throughput disruptions.
These Segment Operating Adjusted EBITDA increases were partially offset by the impact of higher inflation on materials, labor and overhead costs of $15.3 million and increased selling, general and administrative costs of $10.9 million, primarily due to a $7.9 million loss contingency recorded related to the 37 BP litigation and $3.0 million of higher personnel related costs.
Net cash provided by (used in) financing activities Our financing activities provided net cash of $60.1 million during 2022 as opposed to a net use of $12.1 million in cash during 2021 primarily due to increased net proceeds from borrowings of $83.5 million partially offset by repurchases of stock under our share repurchase program of $10.1 million in 2022. 30 Table of Conten t s Financial Condition Our current assets increased to $696.4 million at December 31, 2022 from $636.0 million at December 31, 2021, an increase of $60.4 million or 9.5%.
Net cash used in investing activities Net cash used in investing activities decreased by $40.3 million during 2023 as compared to 2022 primarily due to the cash inflows from the sale of the Tacoma facility's land, building and certain equipment assets for $19.9 million in the first quarter of 2023 and the net cash used to acquire MINDS in the second quarter of 2022 for $17.8 million. 31 Table of Contents Net cash (used in) provided by financing activities Our financing activities used net cash of $18.3 million during 2023 as opposed to providing net cash of $60.1 million during 2022 primarily due to increased net repayments on borrowings of $89.7 million partially offset by repurchases of stock under our share repurchase program of $10.1 million in 2022 that did not recur.
The decrease in Segment Operating Adjusted EBITDA resulted primarily from: (i) the impact of higher inflation on materials, labor and overhead costs of $66.7 million, (ii) increased general and administrative costs of $8.3 million, (iii) manufacturing inefficiencies of $5.3 million largely due to logistics and manufacturing throughput disruptions and (iv) increased research and development costs of $4.2 million.
These increases to Segment Operating Adjusted EBITDA were partially offset by the impact of higher inflation on materials, labor and overhead costs of $25.5 million and increased selling, general and administrative costs of $18.5 million, primarily due to $15.1 million higher personnel related costs largely driven by general employee cost increases and higher annual incentive compensation costs.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+3 added−1 removed4 unchanged
Biggest changeBased on market dynamics, we strategically and selectively order and inventory certain items beyond a just in time basis. The most significant component of our inventory is steel. Significant increases in the market price of steel can negatively impact our gross profit as we are often unable to pass along all of these price increases to our customers.
Biggest changeSignificant increases in the market price of steel can negatively impact our gross profit as we are often unable to pass along all of these price increases to our customers. A significant decline in the market price of steel could result in a decline in the market value of our equipment or parts.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk and Risk Management Policies Interest Rate Risk We are exposed to changes in interest rates, primarily from our domestic Credit Facilities and our international credit facilities and term loan.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk and Risk Management Policies Interest Rate Risk We are exposed to changes in interest rates, primarily from our Credit Facilities and our international credit facilities and term loan.
Our domestic Credit Facilities include a $250.0 million revolving credit facility, which bears interest based on market rates plus an applicable margin as defined in the Credit Agreement.
Our Credit Facilities include a $250.0 million revolving credit facility, which bears interest based on market rates plus an applicable margin as defined in the Credit Agreement.
Based on the outstanding balance on our domestic Credit Facilities of $78.0 million as of December 31, 2022, a hypothetical 100 basis point increase in the interest rates would have a $0.8 million impact on our annualized interest expense. We had no borrowings outstanding on our prior credit facility as of December 31, 2021. We do not hedge variable interest.
We had outstanding Credit Facilities of $78.0 million as of December 31, 2022, a hypothetical 100 basis point increase in the interest rates would have had a $0.8 million impact on our annualized interest expense in 2022. We currently do not hedge variable interest.
Foreign Exchange Risk We are subject to foreign exchange risk at our foreign operations. Foreign operations represent 26.9% and 23.7% of total assets at December 31, 2022 and 2021, respectively, and 17.1% and 17.2% of total net sales for the years ended December 31, 2022 and 2021, respectively.
Foreign Exchange Risk We are subject to foreign exchange risk at our foreign subsidiaries that have operations denominated in currencies other than the U.S. dollar. These foreign operations represent 28.8% and 26.9% of total assets at December 31, 2023 and 2022, respectively, and 13.4% and 17.1% of total net sales for the years ended December 31, 2023 and 2022, respectively.
A significant decline in the market price 33 Table of Conten t s of steel could result in a decline in the market value of our equipment or parts. We utilize strategies that include forward-looking contracts and advanced steel purchases to ensure supply and minimize the impact of price volatility. 34 Table of Conten t s
We utilize strategies that include forward-looking contracts and advanced steel purchases to ensure supply and minimize the impact of price volatility. 34 Table of Contents
Raw materials used in the manufacture of our products include carbon steel, pipe and various types of alloy steel, which are normally purchased from distributors and other sources. The majority of steel is scheduled on a just in time arrangement from suppliers to better manage inventory requirements at our manufacturing facilities.
Commodity Risk We purchase raw materials and some manufactured components and replacement parts for our products from leading suppliers both domestically and internationally. Raw materials used in the manufacture of our products include carbon steel, pipe and various types of alloy steel, which are normally purchased from distributors and other sources.
Removed
Due to the limited exposure to foreign exchange rate risk, a 10% fluctuation in the foreign exchange rates at December 31, 2022 or 2021 would not have a material impact on our consolidated financial statements. Commodity Risk We purchase raw materials and some manufactured components and replacement parts for our products from leading suppliers both domestically and internationally.
Added
Based on the outstanding balance on our domestic Credit Facilities of $72.0 million as of December 31, 2023, a hypothetical 100 basis point increase in the interest rates would have a $0.7 million impact on our annualized interest expense.
Added
A 10% fluctuation in foreign exchange rates throughout 2023 would have resulted in an impact of $17.9 million and $0.7 million to "Net sales" and "Net income (loss) attributable to controlling interest", respectively, in our Consolidated Statements of Operations for the year ended December 31, 2023.
Added
The majority of steel is scheduled on a just in time arrangement from suppliers to better manage inventory requirements at our manufacturing facilities. Based on market dynamics, we strategically and selectively order and inventory certain items beyond a just in time basis. The most significant component of our inventory is steel.

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